Raising Tobacco Taxes in FY 2021-2022
A crucial step towards a tobacco-free Bangladesh by 2040
Raising tobacco taxes would:
Encourage nearly 1.1 million adults to abstain from smoking and deter more than
800,000 youth from smoking initiation
Save the lives of nearly 390,000 current adults and 400,000 current youth from
premature deaths
Generate nearly BDT 300 billion in tax revenue
Raising Tobacco Taxes in FY 2021-2022
A crucial step towards a tobacco-free Bangladesh by 2040
Bangladesh is one of the largest tobacco consuming countries in the world. i
• 35.3% of people 15 years and older in Bangladesh consume tobacco.
Tobacco use in Bangladesh is deadly and costly.ii, iii
• In 2018, tobacco use killed almost 126,000 people.
• The total economic cost of tobacco use from lost productivity and direct healthcare costs of
smoking related illnesses was estimated at BDT 305.6 billion in 2017-18, meanwhile tobacco tax
revenues from Supplementary Duty and VAT were BDT 228.1 billion in 2017-18.
• The adverse effect of tobacco cultivation on the environment and the livelihood of farmers is
enormous.
The current tobacco tax structure in Bangladesh is complex iv and is not adequate to discourage
tobacco usev:
• It is a complex multi-tiered ad-valorem excise tax which includes large variations in tax rates
depending on:
– the type of tobacco product (cigarettes, biris, and smokeless tobacco);
– the product characteristics (filter or without filter); and
– the cigarette brand type (low, medium, high and premium priced brands);
• The multi-tiered tax system for cigarettes has resulted in:
– cigarettes remaining cheap and affordable;
– smokers switching to cheaper cigarettes instead of quitting;
– stable cigarette sales per adult in recent years;
– a relatively constant cigarette smoking prevalence in recent years.
• Low taxes and prices on biris and smokeless tobacco keep these products highly affordable.
Raising taxes in Bangladesh would save lives while increasing government revenue.
• The most effective way to reduce tobacco use is to raise the prices of tobacco products through
tax increases that lower their affordability.
• Higher prices discourage youth from initiating tobacco use and encourage current users to quit.
Focusing on the following actions will likely have the most impact in decreasing tobacco use
prevalence in Bangladesh:
• Drastically increasing the price of cigarettes in the lowest tier, which comprises the bulk of the
market.
• Substantially increasing the price of biris to reduce the gap with the cheapest cigarettes and to
discourage switching between products.
• Improving the enforcement of tax policy on smokeless tobacco and exploring other non-tax
measures that can amplify its impact, such as standardized packaging.
Recommendations for cigarette tax system
2021-2022: Introduce a tiered specific excise with uniform tax burden (excise share of 65% of
final retail price) across all cigarette brands (Table 1).
Table 1: Proposed Scenario of Taxation and Maximum Retail Price (MRP) of Cigarettes (per pack of 10)
CURRENT Tax Structure PROPOSED Tax Structure
CURRENT Indicators 2021-2022 PROJECTED Indicators
2020-2021
SD (Ad
Valorem- SD
Retail Retail
% of SD Share in Retail SD Amount (Specific - SD Share in Retail SD Amount
Tier Price Tier Price
Retail Price (BDT) BDT) Price (BDT)
(BDT) (BDT)
Price)
Low 39+ 57% 57% 22.23 Low 50+ 32.50 65% 32.50
Medium 63+ 65% 65% 40.95 Medium 70+ 45.50 65% 45.50
High 97+ 65% 65% 63.05 High 110+ 71.50 65% 71.50
Premium 128+ 65% 65% 83.20 Premium 140+ 91.00 65% 91.00
Note: SD stands for Supplementary Duty. 15% VAT and 1% Heath Development Surcharge are applied to
the final retail price of cigarettes in addition to the SD.
2021-22 to 2025-26: Reduce price tiers from four to two in the medium-term by reducing the
gaps in final prices and tax rates between cigarettes brands.
If the Government of Bangladesh reforms the current cigarette tax system following the
recommendations in FY 2021-2022, it would achieve the following:
• Reduce the prevalence of cigarette smoking from 15.1% to 14.1%;
• Encourage nearly 1.1 million adults to refrain from smoking and deter more than 800,000 youth
from smoking initiation;
• Save the lives of nearly 390,000 current adults and more than 400,000 current youth from
premature deaths in the long term;
• Generate nearly BDT 34 billion in additional tax revenues from Supplementary Duty, Health
Development Surcharge and VAT on top of the collection for FY 2020-2021, that is an increase
by 12% of current tax revenue from cigarettes in the first year.
• Increasing cigarette prices more at the LOW tier will help relatively lower income smokers in the
LOW tier to quit and at the same time limit the ability of smokers to substitute to cheaper
brands when prices increase in the higher price tiers.
Way forward
Following these tax recommendations would greatly further economic development and align tobacco
tax policy in Bangladesh with global best practices.
Bangladesh has committed to achieve tobacco-related targets under the Global Action Plan for the
Prevention and Control of NCDs and the Sustainable Development Goals (SDGs) vi viii. Raising taxes on
tobacco is a cost-effective way to reach those targets. It is also a major step towards achieving the vision
of a tobacco free Bangladesh by 2040.
At the same time, tobacco tax reform will generate significant additional revenue to finance Bangladesh
health and development priorities. This is a clear ‘win-win’ for the Government and people of
Bangladesh.
i Global Adult Tobacco Survey, Bangladesh, 2017.
ii
Nargis N, Faruque GM, Ahmed M, Huq I, Parven R, Wadood SN, Hussain AG, Drope J. comprehensive economic assessment of the health
effects of tobacco use and implications for tobacco control in Bangladesh. Tobacco Control (forthcoming).
iii Hussain AKM Ghulam, Rouf ASS, Shimul SN, Nargis N, Kessaram TM, Huq SM, Kaur J, Sheikh MKA, Drope J. The economic cost of tobacco
farming in Bangladesh. International Journal of Environmental Research and Public Health. 2020, 17, 9447; doi:10.3390/ijerph17249447.
iv Budget documents of Government of Bangladesh 2011-2018.
v Nargis N, Hussain AKMG, Goodchild M, Quah ACK, Fong GT. A decade of cigarette taxation in Bangladesh: lessons learnt for tobacco control.
Bulletin of the World Health Organization. Available online at: https://www.who.int/bulletin/online_first/18-216135.pdf?ua=1.
vi United Nations. Transforming Our World: the 2030 Agenda for Sustainable Development. New York, United National General Assembly; 2015.
viii World Health Organization. Health in 2015: From MDGs, Millennium Development Goals to SDGs, Sustainable Development Goals. Geneva,
World Health Organization; 2015.
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