A distinct policy shift is currently being observed in the global tobacco taxation landscape. Over the past fifteen years, many nations have pivoted away from ad valorem (value-based) tax systems in favor of specific tax system.
Analysts point out that a specific excise framework is relatively simple, predictable, transparent, and efficient; it not only streamlines tax administration but also plays a pivotal role in deterring smoking.
Furthermore, this approach ensures that revenue growth remains stable and predictable over the long term. Consequently, the global adoption of specific excise tax systems is accelerating.
A report by the global consultancy firm Ernst & Young reveals that significant policy transformations have reshaped the global tobacco tax landscape over the last decade and a half. Between 2008 and 2024, tobacco tax systems underwent a notable evolution.
The number of countries utilizing specific excise taxes on tobacco rose from 56 countries in 2008 to 72 by 2024. During this same period, the number of countries employing a mixed tax system, with a clear preference for specific excise, nearly doubled, increasing from 21 to 38.
In contrast, the reliance on ad valorem methods has dwindled significantly, falling from 54 countries in 2008 to just 42 in 2024. This indicates a steady global migration toward specific excise models.
According to experts, this shift is primarily driven by the administrative simplicity and overall effectiveness of the specific excise system. This method curtails the potential for tax evasion, as it limits the ability to manipulate prices or under-report the value of tobacco products.
Moreover, even if cigarette sales decline, the government’s revenue stream remains relatively resilient due to the fixed tax applied at every tier. This stability makes long-term budgetary planning far more realistic and sustainable.
Against the backdrop of this global trend, the push to reform Bangladesh’s tobacco tax structure is becoming increasingly urgent. Analysts observe that the country is currently grappling with high inflationary pressures, even as the government sets ambitious revenue collection targets.
In this environment, transitioning to an effective, streamlined, and modern tobacco tax system is a timely necessity. Given that the tobacco sector is the government’s largest single source of revenue, a long-term structural tax policy is essential to ensure that collections remain sustainable and predictable.
Recently, during a roundtable discussion in Dhaka hosted by the Policy Research Institute (PRI), economists and analysts recommended a phased exit from the ad valorem system in favor of a specific excise framework.
They further emphasized that Bangladesh’s current multi-tiered tax structure for tobacco is overly complex, leading to unpredictable revenue outcomes.
At the same time, the existing framework has proven ineffective at both reducing smoking rates and curbing the illicit cigarette trade. Under these circumstances, the experts argued that adopting a specific excise system through a clear, long-term roadmap in the upcoming National Budget (2026–27) would make tax administration simpler and more efficient. Ultimately, this would facilitate stable revenue growth while ensuring policy consistency and long-term sustainability.
