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Tobacco tax increase positive, but not enough; multinational tobacco companies benefited

Taifur Rahman :: The proposed national budget for 2014-15 increases taxes on tobacco to some extent, which is not enough for effective tobacco control. Although prices of cigarettes and bidis will increase a little bit, the increase is not significant enough to reduce the use of these products. On the other hand, the rate of tax on jarda and gul, the two major smokeless (chewing) tobacco products, has been doubled, which is very positive. However, this increase may not be effective unless enforcement of taxes on these products is strengthened.

The way various data and information on tobacco have been used in the budget speech for presenting the rationale behind taxing tobacco is very positive. It reflects the constructive thoughts within the government with regard to tobacco control. Along with mentioning the figures of deaths and disabilities due to tobacco, the speech also mentions the importance of complying FCTC in reducing the use of tobacco.

The most significant progress in this year’s budget is the increase of tax rate on the smokeless tobacco products namely jarda (chewing tobacco) and gul (powdered tobacco). The rate of ‘supplementary duty’ on these two products has been increased from 30% to 60%. The Finance Minister deserves thanks for this measure. But if the current state of lack of enforcement of taxes on these products continues, then this tax increase will not have any impact. It is important that the National Board of Revenue (NBR) and the government come up with specific measures for strengthening tax collection from these smokeless tobacco products.

Some increases in the rate of cigarette taxes have been proposed, which is positive but not enough. The proposed increases in the rates of cigarettes taxes are: 4% in case of the two cheapest categories (‘low’ and ‘medium’), 2% on the more expensive category (‘high’) and no increase in case of the most expensive (‘premium’) category. In addition, the values (prices) of packets have been increased across all tiers at varying rates: ranging from 9.57% to 19.05%. As a result, the prices of cigarettes will increase to some extent, but the increase will be insignificant, particularly in the case of the cheapest cigarettes. The price of each stick of the cheapest cigarettes will increase by only 0.13 taka. It is important to note that the manufacturers of the most expensive cigarettes, mainly the multinational tobacco companies, are given opportunities of earning additional profits by keeping the tax rate on these products unchanged while artificially increasing the value of the same. Tobacco control is impossible by giving benefits to the tobacco companies.

Following strong demand for removing the price tiers of cigarettes, it was expected that the number of price tiers might be reduced this year, which might result in having 3 price tiers instead of 4. Unfortunately, that has not been done and the number of price tiers remains the same.

The price (inclusive of tax) of bidi has been increase by about 15%, which is not significant considering the very low price of bidi. The budget speech mentions that the price (inclusive of tax) of 25-stick pack of ‘non-filtered’ bidi has been increased from 5.354 taka to 6.14 taka, which means that the price per stick will increase only by 0.03 taka. Besides, the price of ‘filtered’ bidi has been increased in the same way as well. In case of bidi, both the tax rate and base price have been increased, which is positive. The Finance Minister in his budget speech has criticized the MPs who have been opposing tax increase on bidi. This criticism is appreciated and it also shows that the political pressure from the bidi lobby is gradually weakening.

Finally, the budget proposed 1% ‘health development surcharge’ on all tobacco products. Such measure may not have any notable impact on the price of tobacco products, but will definitely create important sources of mobilizing resources for tobacco control and public health programs.

Taifur Rahman
Director, Bangladesh Program
Campaign for Tobacco Free Kids


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