Nurul Islam Hasib, bdnews24.com
Published: 2017-04-20 22:19:39 BdST
In a strange paradox, cigarette prices in Bangladesh are among the lowest in the world, and local hand-rolled ‘bidis’ are even cheaper.
But the tax rates are higher than in Norway which is the most expensive country for cigarettes, according to a WHO analysis.
Anti-tobacco groups say this is due to “faulty” taxation. Industries keep the base price very low so that the prices do not go up significantly even after taxation.
In the current tobacco taxation policy, all products are subject to supplementary duty apart from VAT.
But the multinational giants such as British American Tobacco Bangladesh has created different price slabs, and the tax burden on their cheaper products is much lower than the expensive brands, creating a large price gaps between brands.
“People switch between different brands instead of quitting altogether when you increase prices in one slab more than the other,” said ABM Zubair, executive director of Progga that leads some anti-tobacco groups in Bangladesh, told bdnews24.com.
He said they demand lifting all price slabs and imposing specific taxes on all products as the finance minister is preparing to announce the next year’s budget on June 1.
Ten sticks of the lowest tier cigarette are Tk 23 that includes 50 percent supplementary duty and 15 percent VAT and 1 percent health surcharge, he said.
In the premium brand, the supplementary duty is 65 percent and the VAT and surcharge remain the same which means consumers have to pay over 80 percent as tax on the base price. But the products retail at Tk 101 for 10 sticks.
“Traditionally increasing taxes mean increasing prices and lowering consumption. But in Bangladesh it did not happen only due to this faulty taxation. So we demand specific tax on the products like other countries,” Zubair said.
“After imposing specific tax, we want to adjust it every year with the purchasing power of people and inflation,” he said, adding that “the tax hike does not touch people as people’s purchasing power also goes up every year”.
He said tobacco industries keep the base price very low so that the prices do not go up significantly after taxation. “Even then they make 50 percent profit.”
“Because it is very cheap to produce cigarettes and bidis. Tobacco workers are cheapest in Bangladesh,” he said, citing Bangladesh Bureau of Statistics.
The latest survey shows Bangladesh is one of the largest tobacco consuming countries in the world, with 43 percent of adults consuming cigarettes, bidis, smokeless tobacco, or other tobacco products.
In Bangladesh, smoking-attributable deaths represent about 30 percent of all fatalities from heart diseases, 38 percent of all cancer deaths, 35 percent of lung TB deaths, and over 24 percent of deaths from other respiratory diseases.
The most effective way to reduce tobacco use is to raise the price through taxation, according to the WHO. Higher prices discourage youth from initiating tobacco use and encourage current users to quit.
If Bangladesh reforms its current tobacco tax system and impose specific tax equivalent to 70 percent of retail prices of cigarettes, and 50 percent of the retail price of bidis and smokeless products eliminating all price tiers, it will create a huge impact, Zubair said.
“It will encourage nearly nine million adult smokers both cigarettes and bidis to quit and keep over seven million young Bangladeshis from starting smoking and prevent over six million premature deaths caused by smoking.”
By one estimate, the government will earn an additional tax revenue of about Tk 80 billion, he said.