Bangladesh to Raise Tobacco Tax, Recommended as 37% by WHO

According to the foreign media TBSNews on May 13, Bangladesh has 3.78 million adults regularly using various smokeless tobacco products, including bidis and cigarettes, with tobacco-related diseases leading to approximately 161,000 deaths per year. The high consumption of tobacco not only places a huge economic burden on the country - estimated annual costs for medical expenses and productivity losses amount to 3,056 billion Taka - but also hinders progress and prosperity in the nation. Currently, the key approach to addressing this dual threat is to increase taxes and prices on tobacco products to reduce consumption and lessen the damage to public health and economic growth.

In the upcoming 2024-2025 fiscal year budget, tobacco tax revenue is not only a source of income, but also a key tool for protecting public health. Tobacco is considered a major health hazard, and Bangladesh has already implemented laws aimed at reducing tobacco consumption to protect public health. Among the various strategies, raising prices is seen as a widely accepted and effective way to deter consumers from using tobacco.

By targeting taxation on tobacco products, the cost of tobacco products will naturally increase, thereby reducing individuals' purchasing power and propensity to use tobacco. This, in turn, reduces the risk of death from non-communicable diseases related to tobacco. Additionally, while tobacco use may decrease, the increased revenue from higher-priced tobacco products will promote the country's economic development.

This method has also been proven to be beneficial in countries with high tobacco consumption. However, compared to other countries, tobacco products in Bangladesh are moderately priced, making it easy for economically disadvantaged individuals and the country's younger generation to access them. Therefore, increasing the price of tobacco products and raising taxes will help prevent these economically vulnerable users from purchasing tobacco products, further advancing our efforts in tobacco control.

The prices of bidis, cigarettes, and other tobacco products in Bangladesh have not kept pace with the necessary increases. In particular, the prices of low-grade cigarettes have not matched inflation and growth in per capita income. Between 2016 and 2022, average monthly household income increased by 103%, per capita income increased by 93%, and the inflation rate was nearly 9%. The real growth in income and inflation has increased the affordability of tobacco products.

According to data from the World Health Organization (WHO), the affordability of cigarettes has increased by 15% compared to before, indicating a significant need for price increases on low-end cigarettes. Additionally, due to the stagnant prices of low-end cigarettes, the government is experiencing substantial revenue losses in this area.

Cigarettes have been sold in the market at prices higher than those announced in the budget for the 2022-23 fiscal year, with different grades of 10-cigarette packs priced at different levels. For example, a pack of 10 cigarettes of the lowest grade (cheapest) should be priced at 40 taka, but the actual retail price is 50 taka. However, the taxes paid by cigarette companies to the tax authority are based on the declared retail price of 40 taka. This inconsistency is observed across all grades of cigarettes. As a result, cigarette companies evaded taxes amounting to 550 billion taka in the 2022-23 fiscal year. This tax evasion continues to persist, and as a result, the government's revenue loss is even greater in the current fiscal year, as the same tax system is still being enforced.

Furthermore, a study conducted by the non-governmental organization "Unnayan Shamannay" in 2021 revealed that the misconception spread by tobacco companies that increasing the prices of low-grade cigarettes would force low-income users to reduce their daily grocery purchases to maintain their cigarette consumption is highly unlikely. Additionally, there is a lack of practical evidence that cigarette users would switch to bidis due to price increases. In the past, there has been no correlation between an increase in prices of low or mid-grade cigarettes and an increase in bidi sales. Data from the past five years shows a continuous decline in bidi sales while consumption of low-grade cigarettes has been increasing. Therefore, implementing higher taxes on tobacco products has the potential to generate significant revenue for the government.

A recent study has indicated that reforming the current tax system to include specific taxes and raising the minimum price of all tobacco products can generate an additional 10 billion taka in revenue for the fiscal year 2024-2025. This represents a 28% increase compared to current revenue. In the long term, such measures could potentially prevent approximately 538,000 adults and 541,000 young people from premature death. Furthermore, the revenue generated from tobacco taxes could be directed towards developing healthcare sectors and anti-smoking campaigns. This comprehensive approach aims to reduce tobacco use, ultimately promoting public health and long-term economic prosperity.

Furthermore, high prices and taxes will deter people from using tobacco, especially young and low-income users whose purchasing power is affected by price increases. By implementing increased tobacco taxes, the use of tobacco can be reduced, thus lowering the prevalence of non-communicable diseases and associated mortality rates related to tobacco. To reduce the risk of non-communicable diseases in Bangladesh, raising tobacco prices and taxes is a necessary and urgent measure. Given that the National Board of Revenue sets prices for all categories of cigarettes in the budget, prioritizing an increase in the prices of lower-tier cigarettes in the upcoming 2024-25 fiscal year budget is crucial. Additionally, strengthening pricing and taxes on bidi and smokeless tobacco products is equally important.

Increasing taxes on tobacco products to encourage the reduction of tobacco use is considered a cost-effective strategy aimed at overall national development. Decision-makers should implement higher tax rates on tobacco products to protect both the economy and public health. This measure is in line with Bangladeshi Prime Minister Sheikh Hasina's vision to make Bangladesh tobacco-free by 2040. These measures not only increase revenue but also reduce smoking prevalence, moving the country forward in all aspects of policy.