National, Front Page

Tobacco companies’ trickery

Govt to lose Tk 5,000cr revenue this FY

Published : 27 Feb 2022 10:01 PM | Updated : 27 Feb 2022 10:11 PM

Although most of the products are sold to consumers at the maximum retail price (MRP) in the country, the matter is not followed in the case of cigarette and bidi sales. 

The tobacco companies sell cigarettes and bidis to retailers at MRP rate, while the retailers sell the products to customers at a higher prices than the MRP rate. 

As a result of the tobacco companies’ tactful and fraudulent marketing strategy, the government loses thousands of crores of revenue every year. It is estimated that the government will lose Tk 5000 crore revenue in the current fiscal year (FY) due to the sale of cigarettes and bidi at MRP rate by the tobacco companies. 

Such information was revealed in a study titled - ‘Impact of Price and Tax Change in the National Budget on the Wholesale and Retail Prices of Tobacco Products (Cigarette and Bidi): A cross-sectional survey’, carried out by the Bureau of Economic Research (BER) of Dhaka University and Bangladesh Network for Tobacco Tax Policy (BNTTP). 

Researchers involved in the study, experts on anti-tobacco control and anti-tobacco activists recommended that the government should introduce a specific tax system instead of an ad valorem tax system in order to increase revenue income and prevent evasion. 

Besides, a digital system should be introduced to monitor the market and sale of each product and collect tax; the four-tier tax structure for cigarettes needs to be brought to one tier; and the sale of a single stick of cigarette and bidi should be banned. A national tobacco tax policy also needs to be formulated to address the overall problem of tobacco control and build a tobacco-free Bangladesh by 2040.

Professor Syed Mahfuzul Huq, national professional officer at WHO, said alongside banning the sale of a single stick, the price of the whole packet should be fixed according to the number of sticks contained in one packet and the sale should be ensured in the retail market at that price. In this case, it is necessary to make arrangements to avoid the part or fraction of the price.

Supporting Professor Syed Mahfuzul Huq, Dr Nasiruddin Ahmed, former chairman of the National Board of Revenue (NBR) said that research will give direction to new paths. The NBR and other concerned should take into account the findings and recommendations of this study.

Syed Mahbubul Alam Tahin, technical consultant of the Union said that the tobacco tax structure must be revised to increase revenue income, while the NBR and different other departments concerned should take immediate initiative to prevent tax evasion by tobacco companies.   

Analysis of the data obtained in the study shows that the government loses a huge amount of revenue from cigarettes every year. In the current fiscal year (2021-2022), the amount may be around five thousand crore taka. 

Dr Rumana Huque, a professor of Economics Department at the Dhaka University and convener of BNTTP who led the research team, said that the potential revenue loss for the current fiscal year has been estimated by calculating the receivable amount of tax from the difference between the maximum retail price printed on cigarette packets and the retail sale price of different levels of cigarettes fund in the study.  

“The cigarette items are sold at a much higher price than the maximum price mentioned on the packet everywhere. If it was possible to collect tax on the sale price, the revenue income would be around Tk 5,000 crore in the current fiscal year. In such a way, the tobacco companies are evading huge amount of revenue year after year,” she said at the dissemination programme on the study at the BER’s conference room at Arts Building of Dhaka University on Sunday (February 27).

Hamidul Islam Hillol, project manager of the tobacco tax project at BER; and Ibrahim Khalil, project officer of BER; were also involved in the research. 

Prof Dr Golam Mohiuddin Faruk, general secretary of Bangladesh Cancer Society; Md Shafiqul Islam, program head of Vital Strategies; SM Abdullah, an associate professor of DU’s Economics Department; Iqbal Masud of Dhaka Ahsania Mission, Ataur Rahman of CTFK, officials and journalists from various anti-tobacco organisations were also present on the occasion and took part in a question and answer session on the research.

The study shows that the maximum retail price of 20-stick packet of premium tier cigarette is printed on a packet at Tk 270, which is sold at an average price of Tk 294.29, while high tier cigarette packet is sold at an average price of around Tk 229.88 instead of Tk 204, middle tire at Tk 136.86 instead of Tk 126 and low tier at Tk 95.15 instead of Tk 78. The bidi is also being sold at a higher price than the MRP rate.

Prof Dr Rumana Huque said that in the study they also found that cigarettes and bidis are sold at higher prices than the MRP rate in the wholesale market too. They carried out the study following quantitative research methods and collected data from 48 retail outlets of public places and 24 wholesale outlets in 12 cities and towns, including Dhaka, Barishal, Khulna and Mymensingh.

Hamidur Rahman Khan, a technical consultant of The Union, said that tax evasion in tactful ways must be stopped. The tobacco companies are selling cigarettes and bidis at MRP rate, while the retailers are selling the products to customers at a much higher rate due to loopholes in the law and lack of monitoring. “We hope that the government will pay attention to the issue,” he said.