‘Govt loses due to complex tobacco tax structure’

A new study has found that the government of Bangladesh is losing revenues to industries due to the complex tobacco taxation system.

The findings reinforced the claim of the anti-tobacco groups that industries were flourishing their business due to the faulty tax structure, despite the fact that the government is increasing the tobacco prices in every budget.

 Journalist Sushanta Singha was the lead researcher of the study which was presented on Saturday at the ongoing 51st Union World Conference on Lung Health being held virtually from Spain.

According to the study, the existing tier-based tax system benefited the tobacco industries and tax evasion became a major obstacle for tobacco control.

As an example, the research presented the case of British American Tobacco Bangladesh (BATB) which is the largest multinational tobacco industry having more than 64 percent market share of cigarettes in Bangladesh.

The government of Bangladesh and government owned different bodies have about 10 percent share and five high officials from the government represent the board of directors of BATB.

In 2009, BATB’s net-profit was Tk 2,070 million. It was Tk 10,010 million in 2018 which means BATB’s net profit boost-up about 5 times during the period.

But the study found that BATB’s production of cigarettes increased only two times - 24,701 million sticks in 2009 and 51,000 million sticks in 2018.  From 2017 to 2018, cigarette production reduced 3 percent whereas profit increased 28 percent.

The retail price of one packet (10 sticks) premium brand cigarette was Tk52 (minimum) in 2010 with 58 percent supplementary duty (SD). The price rose to Tk75 in 2018 with 65 percent SD. Price of this brand increased 44 percent (Tk23) while tax increased only 12 percent.

This benefitted the BATB, according to the study which was conducted to identify the weakness, gaps and challenges of the tobacco tax system for cigarettes and how the existing system benefits industries.

The researchers collected BATB’s financial statements for from 2009 to 2018.

Production of cigarettes, net-profit and annual tax submitted to the government by BATB were analysed to understand the tier-based tax system for cigarettes and its effects on industries net-profit and reduction of tobacco consumption in Bangladesh.  

“Cigarettes prices should increase with specific duty and a single and uniform tax system should be introduced in Bangladesh. National Board of Revenue should revise the taxation system as per the FCTC guideline article 6 for achieving the vision of tobacco fee Bangladesh 2040,” the researchers concluded.

The article 6 says that effective tobacco taxes significantly reduce tobacco consumption and prevalence, and also can be an important source of revenue.

Tobacco taxes are economically efficient and reduce health inequalities, according to the article 6 of WHO’s FCTC which is the first treaty negotiated under the auspices of the World Health Organization.

Bangladesh has ratified this evidence-based treaty and enacted the tobacco control law.