The Financial Express

Milking the tobacco sector more  

| Updated: June 20, 2020 22:35:26

Milking the tobacco sector more   

Finance Minister AHM Mustafa Kamal since his presentation of the budget in parliament on June 11 last has, at least, on a couple of occasions said he would spend first and then locate sources of earning.

The inner spirit of his statement is that the government would not hesitate to spend money on issues of people's welfare, that too, during an unprecedented health emergency.

However, the fact remains that the outgoing fiscal has not been a normal one as the Covid-19 pandemic is wreaking havoc on life and livelihood across the world, including Bangladesh. The situation in the upcoming fiscal tends to be very much uncertain.

As feared, the revenue mobilisation, both tax and non-tax, in the outgoing fiscal is likely to fall far short of the target. This is partly due to the pandemic and partly for setting unrealistic targets. The problems that are being faced now are likely to continue in the short-term unless and until a vaccine or cure is found. Yet the government has proposed a revenue target for the upcoming fiscal that many find rather 'fictional' and absurd. This is thought to be more true in the case of tax revenue target.

The government has offered some tax concessions to individuals, companies and businesses during a difficult time, thus, making the intended revenue mobilisation for itself more difficult. However, the government has chosen two obvious targets---telecom and tobacco--- to milk maximum possible tax revenue in the upcoming fiscal.

The rate of supplementary duty on mobile phone services---both data and voice call---has been hiked by 5.0 per cent to 15 per cent. The cell phone users do also pay 15 per cent value added tax (VAT) and 1.0 per cent surcharge on talk-time and messaging services. The VAT on mobile internet use is being collected at a rate of 5.0 per cent. 

The hike in supplementary duty has evoked resentment among both telecom companies and mobile phone users. However, the situation is different in the case of tobacco sector where both price slab and supplementary duty on cigarettes have been rising constantly. The prime victims of the price rise---smokers, for understandable reasons, do not, or cannot, protest. And the government does take advantage of this situation.

The budget proposed for the next fiscal year is no exception. Both prices and tax rates of lower, medium, high and premium slabs of cigarettes have been hiked. The increase is expected to help the National Board of Revenue (NBR) mop up a handsome amount of extra revenue. But the amount could have even more had the NBR increased the slab prices of lower segment cigarettes in line with that of premium and higher segments.

In the case of latter segments, the slab prices have been increased by Tk. 4-5 per packet of 10 sticks of cigarettes, whereas the increase in the case of lower segment is only Tk.2.0 for a packet of 10 sticks. But the fact remains that 70 per cent smokers consume lower segment cigarettes. There is no reason to believe that the government does have certain sympathy for cigarette smokers who belong to lower rung of society. Rather, cigarettes need to be made costlier for these people, who, in most cases, cannot afford treatment of smoking-related diseases.

It is estimated that an increase in slab price of lower segment of cigarettes would help the government fetch an additional revenue worth between Tk. 10 and Tk.12 billion. Given the tight situation as far as revenue earning is concerned, it is a handsome amount.

However, the government does need to be cautious about the price increase of cigarettes, for it leads to infiltration of illegal cigarettes into the market. Proper vigilance on the part of the taxmen should be in place to check such a possibility.


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