Informal smokeless tobacco factories evade tax

Finds a study

Staff Correspondent

6 April, 2021 12:00 AM printer

The informal smokeless tobacco (SLT) production in the country is a major source of tax evasion, finds a new study.  

Out of 483 SLT factories, including 435 zarda and 48 gul factories, only 218 pay taxes, it said.

The findings of the study titled ‘Factors Inhibiting Smokeless Tobacco Tax Payments by Smokeless Tobacco Manufacturers Operating Outside the Tax Net in Bangladesh’ were unveiled on Monday.

Absence of a fully automated tax return processing system and lack of a secure tracking system facilitate the tax evasion, it said. 

The study identifies NBR’s lack of trained officials, organisational structure of field offices and the outdated equipment and systems as a hurdle to stopping the tax dodging.

The study, conducted with assistance from Campaign for Tobacco Free Kids (CTFK), surveyed 88 out-of-tax net SLT producers, including 81 zarda and 7 Gul manufacturers, in 29 districts of eight divisions.

33 percent of the producers surveyed said they don’t even have a valid trade license, while 91 percent of them produce SLT products manually, the study also reveals.

The study showed that SLT products are manufactured primarily in small unmarked factories or houses.  Their total monthly gross turnover is estimated at Tk27 million.

To disseminate the findings of the study with the NBR, a webinar was jointly organised by a number of anti-tobacco campaigners, including National Heart Foundation, Dhaka Ahsania Mission, UBINIG, Voice and PROGGA

The study recommends that with a view to safeguarding public health and increasing revenue collection, a reform of the SLT tax structure should be undertaken.

Moreover, the price difference between different SLT products should be reduced to curb affordability. T

The study also pushes for introducing automated tax return processing system, equipping and training NBR personnel, restructuring NBR field formations, introduce a secure tracking and tracing system (TTS) that includes a banderole, authorizing local government institutions to bring SLT manufacturers under tax nets and not awarding SLT producers. 

22 million or 20.6 percent of Bangladeshi adults aged 15 years and above use smokeless tobacco.

Among the student of 13-15 years old, the prevalence of SLT use is 4.5 percent. Despite such high prevalence, in FY20, SLT sector contributed Tk 306 million as revenue as only 0.12 percent of total tobacco revenue was collected that year.

SLTs are severely detrimental to health and responsible for causing Oral, Oropharyngeal and other types of cancers, but SLT manufacturing and marketing are mostly unsupervised and unregulated, anti-tobacco campaigners alleged.

As a result, these products remain quite cheap, available and affordable, they said, adding that bringing SLT producers under tax net will increase the tax revenues from this sector considerably.

The findings of the study were presented at the webinar by Dr Nasiruddin Ahmed, the leader of the research team and former Chairman of the National Board of Revenue (NBR).

Chief Guest of the event Zakia Sultana, NBR Member (VAT Audit and Intelligence) said: “SLT use should be reined, for the sake of revenues and public health. Reducing SLT use would also reduce health sector expenditure.”

Md Mustafizur Rahman, lead policy advisor of CTFK, Bangladesh and former chairman of Bangladesh Chemical Industries Corporation (BCIC) also spoke at the event.

The discussion session was participated by a wide range of NBR high officials, leaders of the anti- tobacco organisations and experts including CTFK research director Maria G Carmona, CTFK South Asia Programs Director Vandana Shah.