Introduction:

The design of tax instruments for controlling consumption of tobacco is a complex process impacting as it does on the livelihoods of millions of people engaged in activities related to tobacco production, sale, and distribution. Tax instruments can only be one component of a broad-based approach to controlling tobacco use. Policy-makers all over the world have come, therefore, to realize the need for the control of tobacco consumption. Many countries, mainly introduced a number of policy measures to control tobacco consumption with varying degrees of success. These policy measures relate to public education, regulation, and public finance instruments. Research shows that tobacco taxes reduce smoking and extend lives. Significant increases in tobacco taxes are a highly effective tobacco control strategy and lead to significant improvements in public health.

Imposing Tax can play an important role in reducing the consumption of tobacco by;-

• Phasing out the existing multi-tiered ad-valorem tax system of cigarettes.
• Amending the existing law by replacing the existing ad valorem tax with specific taxes. The government may move towards a uniform fixed tax structure by first reducing the number of current price tiers of cigarettes and adding a fixed tax to the existing ad valorem tax structure.
• Increasing biri taxes substantially through a uniform biri-specific excise tax that significantly raises biri prices in order to reduce its usage.
• Formalizing the SLT market in order to address the problems of informality and heterogeneity of SLT products.
• Harmonizing tax rates across all tobacco products in order to avoid substitution of one tobacco product by another.
• Implementing annual adjustments to specific excise tax rates to retain their real value over time.
• Earmarking tobacco tax revenue for health promotion and comprehensive tobacco control.
• Strengthening NBR by reforming its legal framework and enhancing its institutional capacity.
• Undertaking strong advocacy programs to convince the government to address the conflict of interest in tobacco taxation.

Raising Taxes Saves Lives and Increases Government Revenue: 

If Bangladesh adopted a uniform specific cigarette excise tax of 34 taka per 10 cigarettes and eliminate the existing multi-tiered ad-valorem structure, it would increase the cigarette excise tax to 70% of the average retail price of cigarettes. This tax would:

• Encourage nearly 7 million adult smokers to quit;
• Keep over 7 million young Bangladeshis from starting cigarette smoking;
• Prevent almost 6 million premature deaths caused by cigarette smoking; and
• Provide an additional 15 billion taka (200 million USD) in tax revenue.
• A uniform specific excise tax of 4.95 taka per pack of 25 biris applied to the retail price of biris would Reduce the number of adult bidi smokers by over 3.4 million.

The Congressional Budget Office (CBO) summarizes the existing research and concludes that a 10 percent increase in cigarette prices will lead people under age 18 to reduce their smoking by 5 – 15 percent.  Among adults over 18, CBO concludes, the decline would be 3-7 percent. Taking the mid-point of the estimate for youth suggests that each 1 percent price increase leads to roughly a 1 percent decrease in youth tobacco consumption.

It is already proved that Tobacco taxes decrease tobacco use. Indeed, raising taxes on tobacco and thereby increasing its price is one of the most effective ways to reduce tobacco use. Prices affect virtually all measures of cigarette use, including per-capita consumption, smoking rates and the number of cigarettes smoked daily.

Recommendations:

• Adopt a uniform specific cigarette excise tax that significantly raises cigarette prices and reduces tobacco use.
• Increase bidi tax substantially through a high uniform specific bidi excise tax that significantly raises bidi prices and reduces use.
• Increase taxes on all tobacco products to be equivalent to cigarette taxes and to reduce the use of these products.
• Implement annual adjustments to retain real value over time and account for increases in income.
• Strengthen tobacco tax administration, improve enforcement, and tax duty-free sales of tobacco products in order to reduce tax evasion and avoidance.
• Earmark tobacco tax revenues for health purposes, including health promotion and tobacco control.

Conclusion:

Tobacco excise taxes are a powerful tool for improving health while at the same time being a reliable source of government revenues. Significant increases in tobacco taxes that result in higher tobacco product prices encourage current tobacco users to stop using, prevent potential users from taking up tobacco use, and reduce consumption among those who continue to use, with the greatest impact on the young and the poor. As a result, higher taxes are effective in reducing the death, disease, and economic costs caused by tobacco use. The positive health impact is even greater when some of the revenues generated by tobacco tax increases are used to support tobacco control, health promotion, and/or other health-related activities and programs.

writer: Nur Alam

LL.B. student from BGC Trust University Bangladesh.