Why tobacco taxation is not working in Bangladesh

According to the Tobacco Atlas, a research organisation that tracks the tobacco epidemic worldwide, about 200,000 people die every year from tobacco-related illness in Bangladesh. This means 548 deaths per day, more than 3,800 deaths per week and over 16,600 deaths per month. In fact, nearly one in every five deaths in the country is linked to smoking and smokeless tobacco. Millions more suffer from cancers, heart disease and respiratory problems due to tobacco use, imposing a heavy burden on families, healthcare system and the economy.

In addition to the devastating loss of lives and human suffering, a recent research figured out that the annual economic cost of tobacco in Bangladesh - including healthcare expenses, lost productivity and environmental damages - amounts to a staggering Tk 870 billion. By contrast, the tobacco industry's total tax contribution to the government was around Tk 410 billion in 2024. This means that the economic losses caused by tobacco are more than twice the revenue generated from the sector.

This colossal loss of lives and the economic consequences of tobacco are preventable if people quit smoking. To achieve this, increasing taxation is one of the key policy measures governments can use for tobacco control. Taxation not only can save lives but also reduces negative economic impacts and increases tax revenue. According to the World Health Organization (WHO), raising taxes on tobacco products is among the most effective and cost-efficient measures available to governments for reducing smoking, protecting public health, and preventing young people from becoming addicted to nicotine.

The WHO recommends that taxes must account for at least 75 per cent of the retail price of cigarettes. As of 2025, over 40 countries had met or exceeded this benchmark, leading to lower tobacco consumption and improved public health outcomes. Sri Lanka provides a compelling example in this regard. Through a series of aggressive tax increases, it has raised the tax share of the retail price of its most-sold cigarette brands to around 77 per cent. As a result, cigarettes have become significantly less affordable, contributing to an estimated 30-33 per cent decline in consumption over the past decade, making Sri Lanka a global model for effective tobacco taxation.

For a country like Bangladesh, where the healthcare system is already under considerable strain, reducing the prevalence of tobacco-related diseases would ease pressure on hospitals and healthcare facilities while improving overall public health outcomes. It is therefore unsurprising that anti-tobacco organisations call for higher tobacco taxes every year ahead of the national budget. Successive governments have also increased taxes on cigarettes and other tobacco products from time to time. However, despite periodic tax increases, tobacco taxation has not worked as effectively in Bangladesh as it has in many other countries. The reason is not that taxes are too low; rather, the tax structure itself is flawed.

Bangladesh currently imposes a tiered ad valorem supplementary duty (SD) on retail prices, along with a 15 per cent VAT and a one per cent Health Development Surcharge (HDS). There are four cigarette price tiers. The total tax on cigarettes stands at around 68 per cent for low-tier brands to 80 per cent for premium brands. Herein lies the problem. When taxes rise across all tiers, smokers can simply switch from premium brands to cheaper low-tier brands, allowing overall consumption to remain largely unchanged, if not increased. This tiered taxation system also benefits tobacco companies because consumers are not leaving the market.  

The dominance of low-priced cigarettes is evident: nearly 90 per cent of smokers in Bangladesh consume lower-tier brands. Tobacco companies have capitalised on this trend by continuously introducing new low-priced products, ensuring that cigarettes remain affordable and accessible despite periodic tax increases. Consequently, the public health impact of tobacco taxation is significantly diluted.

The trend is evident in official data. Analysis of National Board of Revenue (NBR) figures shows that the market share of low-tier cigarettes increased from 25 per cent in the 2006-07 fiscal year to 76 per cent in 2023-24.

Meanwhile, even after annual tax rate hikes, cigarette prices remained very much affordable in Bangladesh. WHO data for 2025 show that Bangladesh ranks 112th among 162 countries in terms of the affordability of low-priced cigarettes. A simple comparison illustrates the point. In Bangladesh, the price of a banana is roughly equivalent to that of a Gold Leaf cigarette. In Sri Lanka, by contrast, a Gold Leaf cigarette costs about 20 times more than a banana. Unsurprisingly, WHO data also show that Bangladesh has the highest tobacco-use prevalence in South Asia at 35.3 per cent, compared with 28.6 per cent in India and 19.1 per cent in Pakistan.

This alarmingly high tobacco use rate despite annual tax increases suggests that Bangladesh's tobacco taxation policy requires fundamental reform rather than incremental annual adjustments. Public health experts have long advocated replacing the current multi-tier tax structure with a simplified and uniform specific tax system that would significantly reduce the price gap between different cigarette categories. Such a system would make it more difficult for smokers to switch to cheaper brands when taxes rise and would therefore be far more effective in reducing overall consumption.

Bangladesh is committed to become smoke-free by 2040. Achieving that goal will require more than rhetoric. It demands a tobacco taxation system that genuinely reduces affordability, discourages consumption and places public health above industry interests. If taxation is to serve its intended purpose, it must be designed not merely to collect revenue but to save lives.

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