Taxing Tobacco: Rediscovering the Trusted Weapon

Byezid Limon

28 May, 2021 12:00 AM printer

In 1828 German chemists Posselt and Reimann, isolated Nicotine for the first time in human history and categorized it as a ‘Poison’ and how accurate the categorization was! It is certainly a poison and one which is corrupting the veins of one-third of the population above the age of 15 of Bangladesh, according to a recent policy brief by Unnayan Shamannay.

The sheer scale of the tobacco consumption and health damages associated with it is mind numbing. Nearly 1,61,000 people in Bangladesh die every year due to complications arising from tobacco consumption. Moreover, health damages outweigh the revenue generated from tobacco production and sale by 34 percent.

Let us diverge from the health implications of tobacco consumption for a bit. After all,coronavirus pandemic has forced all of us to think about our lives from a different perspective. In these times of unprecedented uncertainty, one statistic regarding poverty and tobacco consumption is particularly alarming and that is, the poorest 20 percent of the population of Bangladesh spends nearly one-fifth (20.57 percent) of their income on tobacco containing products. The data which is derived from the Household Income and Expense Survey (HIES) of 2016, makes one stop and ponder for a moment about how the poorest strata of Bangladesh’s population are chained to the cycle of poverty to a certain extent due to the addictive ‘Poison’. The income which has countless better uses appears to have been held captive to tobacco.

Now, lets bring in coronavirus-induced economic slowdown into the equation and the situation becomes even grimmer. Tobacco being an addictive commodity follows a trajectory of a very mild consumption smoothing on an event of sudden decline of income. Thus, it can be safely assumed that considering the loss of jobs and livelihood during the pandemic, the poorest 20 percent of the population are spending even larger portion of their income on tobacco consumption as their income has invariably gone down while their spending on tobacco consumption can be safely assumed as hovering near the pre-coronavirus amount.

It is possible to name countless better alternative uses for the money which is currently being spent on tobacco consumption. Let us consider education for example. According to the policy brief, families can increase their spending on their children’s education by as much 11 percent if tobacco consumption is stopped and that money is invested in education. This comparative picture shows us how quality of life can be improved through reduction of tobacco consumption.

This brings us to the all-important question. How do we reduce and eventually phase out the consumption of Tobacco in Bangladesh? The most widely accepted answer to this question is by increasing the price of tobacco. Taxing cigarette sales has been globally accepted and adopted as the standard protocol in this regard. Bangladesh government has also been increasing the tax incrementally for quite some time now, but the results have not been satisfactory and there are quite a lot of scope for improvement.

The reasons behind the mismatch between expected reduction in and actual cigarette consumption are multifaceted. The most important reason behind this mismatch is that average growth rate of income in Bangladesh has outpaced the tax-induced rate of increase in the price of tobacco products. Thus, leaving people with more tobacco purchasing power, neutralizing the impact of the imposition of tax. A more aggressive taxation policy seems to be the need of the day to see the fruition of the taxation policy to reduce tobacco consumption.

Currently Ad valorem excise tax is being imposed on sale of cigarettes. For lower grade cigarettes, the excise tax stands at 57 percent while for medium, high, and premium grade cigarettes, it is pegged at 65 percent. For the upcoming FY 2021-22, increase in the minimum retail price has been proposed along with a novel method for calculating ad valorem excise tax on cigarettes in the form of ‘fixed currency amount’ replacing current method based on percentage points. This method is set to help greatly in the fight against tobacco consumption by combating tax evasion and manipulating policies.

According to the projections in the policy brief, the proposal if implemented will decrease cigarette consumption by 1 percentage points while reducing overall tobacco consumption by 6.6 percentage points. This policy will also help 11 lakh people get out of addictive clutches of tobacco and halt 3.9 lakh deaths caused by tobacco consumption related ailments. It will also increase government revenue by 12 percent to 3,400 crore BDT.

Bangladesh has shown great political will under the leadership of Prime Minister Sheikh Hasina to reduce the consumption of tobacco as she pledged to make Bangladesh tobacco-free by 2040. Maybe now is the time to act and take another bold stride in our fight against tobacco.


The writer is a Research Officer at Unnayan Shamannay