Hike tax on cigarettes to boost revenue collection

The tax on cigarettes in Bangladesh should be raised in the national budget for fiscal 2024-25 to boost the country's revenue generation and minimise health risks, according to experts.

The domestic tobacco industry, which constitutes about 13 percent of the annual government revenue, has one of the highest tax incidences in the world, eclipsing even the WHO recommended level.

"However, the prices of locally made cigarettes are among the lowest in the world," said M Masrur Reaz, chairman and chief executive officer of the Policy Exchange of Bangladesh, a private think-tank.

"So, to deter smoking and ensure sustainable revenue growth, the price of cigarettes belonging to all segments must be increased," he added.

He made these remarks at a roundtable on the "National Budget 2024-25: Priorities for High-potential Sectors," organised by the Policy Exchange of Bangladesh in Dhaka yesterday.

Abdul Mannan Patwary, a former member of the National Board of Revenue (NBR), said the government has policies aimed at reducing the risks for impoverished individuals.

"But many low-income people smoke cheap cigarettes, which pose significant health risks. So, to discourage smoking among the poor, the price of low-tier cigarettes should be increased," he added.

At the event, FH Ansarey, managing director of ACI Agribusiness, urged the government to focus on three critical areas concerning the agricultural sector -- environment and climate change, food value chain, and technology.

"There should be coordination between the government and private sector in addressing these issues," he said.

"While the country produces enough, the problem lies with the supply chain. The budget must provide clear guidance on these matters," Ansarey added.

Prof Lutful Hassan, former vice-chancellor of Bangladesh Agricultural University, urged the government to ensure subsidies in the agricultural sector as much as possible.

Wahidur Rahman Sharif, president of the Bangladesh Association of Contact Center and Outsourcing, called for the continuation of tax exemptions for the digital sector.

"Imposing taxes on the growing digital economy will limit the country's potential and it will subsequently fall behind neighbouring countries. If local companies are not given advantage, foreign companies will seize the opportunity and thereby hinder the development of local expertise," he said.

Former Commerce Secretary Shubhashish Bose said the tax system needs to be digitalised as it would make everyone more inclined to pay taxes.

"Reducing reliance on indirect taxes as much as possible will be beneficial. A coordinated plan is necessary, with a strong emphasis on digital infrastructure," he added.