4 months ago


Tobacco taxation calls for revision

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Tobacco is a man-made menace the world is confronting for decades. Bangladesh is very much within the risk arena of this menace. The country is listed among the world's top 10 tobacco consuming countries. According to Global Adult Tobacco Survey (GATS) 2017 (report published in 2020), 37.8 million people consume tobacco in one form or another in Bangladesh. The size of the smoking population is 19.2 million, and that of the smokeless is 22 million. Among the smoking population, around 15 million use cigarette, while another 5.3 million use bidi. These numbers undoubtedly indicate why Bangladesh is still within the list of high tobacco-burden countries in the world and hence tobacco should be a serious cause for concern in terms of public health.

How to drastically limit the prevalence and help the country get rid of the epidemic of tobacco is a million-dollar question for the tobacco control researchers and policy makers of the country. It is well recognised that increase in tobacco price can control its demand. There is also a unanimous consensus that as a fiscal regulatory mechanism "tobacco tax" is the most crucial tool to fight against the high prevalence of tobacco use. Considering the country context, in Bangladesh the importance of the tax and its effective design along with efficient implementation is of many folds. In addition, it is widely discussed and accepted that to make the tobacco tax effective, it has to be consistently adjusted with the "inflation rate" and "income growth" of the country.

Tobacco tax is multi-tiered and based on ad valorem. In the past years tax and price-increase in the low tier compared to others was not sufficient to address the high prevalence and consumption at that tier.  This particular tier in combination with medium tier has the highest level of market share.  More specifically, around 84 per cent of the total cigarettes supplied in the country comes from the 'medium' and 'low' price tiers and the rest 16 per cent is attributed to 'high' and 'premium' price tier. Realising this, most of the tobacco manufacturers introduced their new brands in the low tier, expanding the production of this tier. This helped them take full benefit of tiered tax system and undermine the national tobacco control efforts.

Bangladesh is currently in its era of economic transformation with a political commitment for sustaining high economic development. Better design of tobacco tax and its efficient administration and proper governance will ensure higher revenue earning that can contribute to the goal of sustainable economic development and help curb the menace of tobacco.

In order to achieve the national target of making the country "Tobacco Free by 2040", the tobacco control initiatives should be strengthened and made consistent with the national fiscal stance. The current tobacco tax structure as well as the tobacco tax administration has certain drawbacks. For instance, the price dispersion among the different cigarette price tiers is considerably high allowing the smokers to switch rather than quit. In addition, the ad valorem nature of current excise tax creates the opportunity for tobacco industry to design their brands and products targeting a particular segment of tobacco. As a result, the government is receiving only a small portion of the upward adjustment of base price (Market Retail Price (MRP)) of tobacco. Therefore, it is high time to shift the tobacco tax system towards "specific excise tax", reducing the number of price tiers and thus making the tobacco tax structure as simple as possible.

S M Abdullah and Rumana Huque are Faculty, Department of Economics, University of Dhaka and PhD Researcher, University of York, UK

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