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Budget has not utilized the opportunity of effective taxation on cigarettes: Unnayan Shamannay

 VB  Desk

VB Desk

Thu, 6 Jun 24

Through ensuring effective taxation on cigarettes, Bangladesh could see significant reduction in cigarette use and increase in government’s revenue simultaneously. The National Budget proposed for FY 2024-25 has not utilized this opportunity. National level civil society organizations including Unnayan Shamannay worked together with national and international researchers to come up with effective cigarette taxation proposals for the coming fiscal years. While these proposals have been communicated to the Ministry of Finance and the National Board of revenue well ahead of the Budget Session of the National Parliament, they have not been adequately reflected in the proposed budget.

Of all the cigarettes used in Bangladesh, over 70 percent are low-tier cigarettes. Given this context, anti-tobacco stakeholders proposed to increase the price of a 10-stick pack of low-tier cigarettes from BDT 45 to BDT 60. However, the price has been increased only by BDT 5 (i.e., BDT 50 per 10-stick pack of low-tier cigarette). While this may appear as a 11 percent increase in the retail price of low-tier cigarettes, if the prevailing 10 percent inflation is considered- it becomes evident that the low-tier cigarettes will become further affordable in the coming fiscal year. However, the move to raise the supplementary duty on low-tier cigarettes from 58 percent to 60 percent has been welcomed by anti-tobacco activists. While they have been advocating to raise the ratio even higher (to 63 percent), still this is a significant achievement in terms of closing the gap between supplementary duties on low-tier cigarettes and that on other higher tier cigarettes.

The prices of 10-stick packs of medium-, high-, and premium-tier cigarettes have been increased by respectively BDT 3, BDT 7, and BDT 10. That is the new retail prices will be BDT 70, BDT 120, and BDT 160 respectively. Proposals from the anti-tobacco activists have not been reflected in these new increased prices either. While, in nominal terms, prices of these cigarettes has been raised by 4 to 7 percent, given the prevailing 10 percent inflation, these cigarettes too are most likely to become further affordable in the coming fiscal year.

Although the prices of cigarettes have not been increased as desired, still these nominal increases will result in reducing cigarette sales by 0.3 percent in the coming fiscal year. However, if the proposals from the anti-tobacco organizations were implemented- cigarette sales would come down even more (by almost 2 percent). If the proposals in the National Budget are followed then the revenue earned by the government from cigarette sales will increase by approximately BDT 40 billion compared to the ongoing fiscal year (an 11 percent increase). But it could have been increased by 28 percent (BDT 100 billion) if the prices were increased as proposed by the anti-tobacco organizations. Smoking prevalence can be expected to come down from 15.1 percent to 14.6 percent because of the proposals in this budget. This ratio could have come down further to 13.8 percent if the proposals of the anti-tobacco organizations were reflected in this budget.

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