Change needed in taxing policy to discourage smoking

Change needed in taxing policy to discourage smoking


Dhaka– Anti-tobacco campaigners have demanded introducing a ‘specific tax’ on tobacco products with the increase of tax rate from the upcoming 2017-18 fiscal, aiming to cut tobacco use in Bangladesh.“Tobacco taxation is very complex and a non-pragmatic system in Bangladesh, which helps companies (tobacco companies) gain more profit,” said Dr Mahfuzur Rahman, a consultant to the World Health Organization (WHO).In Bangladesh, all tobacco products are subject to an ad-valorem excise tax (supplementary duty), which is an indirect tax. There is a large variation in tax bases and tax rates, both between brands (for cigarettes slabs) and between tobacco products.Dr Mahfuz said tax burden on cheaper brands (lower cigarettes prices slabs) and cheaper products (bidis and smokeless) is much lower than the expensive brands, creating large price gaps between brands and products.This complexity not only increases administrative costs for the government but also reduces the efficiency of the tax system as consumers can easily switch across brands and products when taxes increase, he added.

Highlighting the existing tobacco taxation, ABM Jubair, the executive director of anti-tobacco advocacy organisation PROGGA, said different rates of ad-valorem tax, for cigarettes, are imposed on different slabs (ranges of prices), and each slab is defined at the discretion of the government.Bidis are taxed at a much lower rate based on a single tariff value also set by the government, he said, adding that for smokeless products (zarda and gul), the ad-valorem tax is imposed on the ‘ex-factory price’ declared by the manufacturers and finally approved or set by local VAT administrations.“This generates confusion in appropriate tax bases, increases compliance costs and encourages manipulation and tax avoidance,” Jubair said. According to the official sources, the standard VAT of 15 percent is also imposed on all tobacco products based on retail price for cigarettes, sum of tariff value and supplementary duty (SD) for Bidi and sum of ex-factory price and SD for smokeless tobacco products.“At present, a faulty taxation system – ad-valorem tax system – continues here, but we demand specific tax on tobacco products apart from increasing tax on tobacco,” Dr Mahfuz said. Urging the National Board of Revenue (NBR) to follow international examples and practices in tobacco taxation, he informed that now about 10 percent of the country’s revenue comes from tobacco industry. However, the WHO expert said if tax is imposed on tobacco products properly, revenue collection from tobacco products will go up and at the same time, tobacco consumption will go down.Former NBR member Aminur Rahman also suggested imposing specific excise tax on tobacco products by removing existing price slabs of these products, to collect more revenue from tobacco industry. Campaigners claim that although cigarette taxes (SD and VAT) range from 65 percent to 80 percent of the retail price, the impact taxes have on prices are highly insignificant because of very low tax bases.In particular for smokeless tobacco, in spite of a statutory effective total tax rate of 115 percent (SD and VAT) the tax-induced increases of zarda and gul’s prices have been minor because the tax base is extremely low. For bidis, the level of the SD was very low but the base (the tariff value) is also very low, they said.Bangladesh is one of the largest tobacco consuming countries in the world, with over 41.3 million (43 percent) adults consuming cigarettes, bidis, smokeless tobacco, or other tobacco products.The ‘Global Youth Tobacco Survey (GYTS): Bangladesh’ report, 2013 reveals that about 58 percent of all men and 29 percent of all women consume some form of tobacco, whether smoked or smokeless.The high rates of tobacco use contribute to a significant number of early deaths and high healthcare costs. The survey says tobacco-related diseases kill over 100,000 people in Bangladesh each year while about Tk 51 billion is spent to treat these diseases.UNB news agency


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