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Increase in the tax rate will further increase the unaffordability of cigarettes, particularly at a time when disposable incomes are low and the consumers’ capacity to pay is under stress.If that happens, consumers will opt for smuggled cigarettes which are sold cheaper due to tax evasion.

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Revenue growth targets may thus not be met.A focus on encouraging compliance with lower tax rates and improved enforcement would be more effective.

“It will be critical for the government to strike a balance between growth and inflation against the backdrop of geopolitical developments and economic uncertainties.

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