Speakers at a webinar said that the existing ad valorem tax system for tobacco products in Bangladesh is complex and faulty. The tobacco companies are reaping big benefits from the tobacco products due to the faulty taxation system, while the government is losing millions of revenue.
As a result, each year tobacco companies are generating profits that are several times higher than their production. At the same time, despite the prices of tobacco products increase, the number of tobacco users is not declining at the expected rate due to the faulty taxation system.
Bureau of Economic Research (BER) of Dhaka University and Bangladesh Network for Tobacco Tax Policy (BNTTP) jointly organised the webinar on ‘Tobacco Tax System, Loss of Government to the Profit of Tobacco Companies’. The event took place through the online meeting platform Zoom on Wednesday (February 23).
Former chairman of National Board of Revenue (NBR) Dr Nasiruddin Ahmed and Prof Dr Rumana Huque of Economics department of Dhaka University were present at the webinar as expert discussants. Associate Professor of the DU’s Economics department SM Abdullah presented the keynote paper, while Project Manager of BNTTP Hamidul Islam Hillol moderated the event.
Representatives from various anti-tobacco organisations working in Bangladesh, health experts and experts on tobacco control joined the webinar.
Speakers at the webinar said that the production of British American Tobacco Company Bangladesh has doubled in the last 10 years, whereas their profit has increased five times in this time. However, the government’s revenue income has not increased at such a significant rate. So, there is no alternative to introducing a specific tax system instead of the current ad valorem tax system for tobacco products from the next fiscal year (2022-23).
In his keynote, SM Abdullah presented the recommendations for the imposition of specific taxes along with concise proposals for pricing and tax rates of tobacco products for the fiscal year 2022-23 on behalf of the anti-tobacco organisations of the country. In the case of the low tier cigarettes, a retail price of Tk 50 with a fixed supplementary duty of Tk 32.50 per 10 sticks was proposed; while for medium-tier cigarettes, Tk 75 with a fixed supplementary duty of Tk 48.75 per 10 sticks; for high tier cigarettes, a retail price of Tk 120 with a fixed supplementary duty of Tk 78.00 for per 10 sticks; and for premium tier cigarettes, a retail price of Tk 150 with a fixed supplementary duty of Tk 97.50 for per 10 sticks was proposed.
Besides, in the case of unfiltered bidis, it has been proposed to keep only 25-stick bidi packets in the market and not 8 and 12-stick packets of bidi.
The speakers urged the authorities concerned to fix the retail price of a 25-stick pack at Tk 25 and impose a specific supplementary duty of Tk 11.25. On the other hand, in the case of filtered bidis, it has been proposed not to keep 10-stick bidi packs in the market, while fixing the retail price of 20-stick bidi packs at Tk 20 and imposing a specific supplementary duty of Tk 9.
In the case of smokeless tobacco products, the retail price of Zarda was suggested to be fixed at Tk 45 per 10 grams with imposing a specific supplementary duty of Tk 27; and the retail price of Gul was suggested to be fixed at Tk 25 per 10 grams with imposing a specific supplementary duty of Tk 15 in the proposal for the upcoming budget
They also mentioned that 15% VAT and 1% health development surcharge should continue to be imposed on the retail price of all tobacco products as before.
The speakers of the webinar said that the amount of economic loss due to tobacco-related diseases in the country was 30,560 crore in the fiscal year 2017-18 and the revenue income from tobacco was 22,866 crore. Only the tobacco companies benefit from tobacco use. On the contrary, people and the government suffer terrible losses. Against this backdrop, a specific taxation system for tobacco products should be introduced in order to control tobacco and increase revenue.
The discussants said that if the proposed increases in prices of tobacco products and taxation were implemented, 1.3 million adult smokers would quit smoking and about 9 million young people would be discouraged from initiating smoking. Additionally, the number of smokeless tobacco users will also be significantly reduced. This will save the lives of about 9 lakh tobacco users in the long run. At the same time, government revenue will increase by approximately BDT 9 thousand 200 crores.
