Home ›› 29 Apr 2023 ›› Front
The World Health Organization (WHO) has recommended the National Board of Revenue (NBR) to intro-duce a tiered specific excise duty with a uniform tax burden– an excise share of 65 per cent of final retail price– for all cigarette brands in the budget for the fiscal year 2023-24 (FY24).
The UN agency also recommended increasing the retail price of all types of cigarettes.
The existing government’s taxation policy on cigarettes has led to a lower sale which is a cause of a recent decline in cigarette revenue collection, according to the WHO recommendations paper.
It said, “Cigarette tax revenues represented more than 11 per cent of government revenues in FY19 or 1 per cent of the country’s GDP. However, since then, cigarette revenues have been systematically declined to around 8 per cent of government revenues or less than 0.8 per cent of GDP reported in FY22.”
The specialised UN agency proposed to set the retail price for premium tier cigarettes at least Tk 150 with Tk 97.50 sup-plementary duty (SD) per 10 sticks, up from Tk 142 with 65 per cent SD, followed by Tk 120 for high-tier cigarettes with Tk 78 SD, up from the existing Tk 111 with 65 per cent SD.
WHO also proposed the revenue board to fix the retail price for medium tier cigarettes at Tk 70 with Tk 45.50 SD, up from Tk 65 with 65 per cent SD, and Tk 55 for low-priced cigarettes with Tk 35.75 SD, up from current Tk 40 with 57 per cent SD.
Here, the 15 per cent VAT and 1 per cent Heath Development Surcharge are applied to the final retail price of cigarettes in addition to the SD.
WHO said, “If the government reforms the current cigarette tax system following the recommendations in FY24, it will generate nearly Tk 42,300 crore in tax revenue, adding more than Tk 9,600 crores in additional tax revenues, which is a 30 per cent increase from the current revenue collection.”
Besides, it will help to reduce the prevalence of cigarette smoking from 15.1 per cent to 13.92 per cent and encourage nearly 14 lakh adults to quit smoking and deter almost 10 lakh youth from getting into smoking.
The reform will also save the lives of more than 488,000 current adults and nearly 492,000 current youth from premature deaths due to tobacco use in the long term.
WHO added that increasing the prices of “low segment” cigarettes more than other segments will help reduce smoking among lower-income groups, who are more likely to smoke low-segment brands.
At the same time, it would reduce the incentives for smokers to substitute consumption towards cheaper brands when prices are increased in higher cigarette price segments.
Reforming the tax system by introducing a specific tax, as recommended by the WHO, and as employed in most countries worldwide, would further reinforce the effectiveness of the cigarette tax system, according to the recommendations.
Bangladesh has committed to achieving tobacco-related targets under the Global Action Plan for the Prevention and Con-trol of NCDs and the Sustainable Development Goals (SDGs).
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, said WHO.
The proposed cigarette tax reform would contribute to a healthier population and generate significant additional revenue to help finance Bangladesh’s health and development priorities and improve the sustainability of the tax system. This is a clear ‘win-win’ for the government, added the
UN agency.
