The National Board of Revenue has planned earning Tk 7,000 crore more only from the rise in tax on cigarette prices in the upcoming fiscal 2019-20, sources said. A highly-placed NBR official told Bangladesh Post they would employ required number of officials for ensuring the extra amount of revenue from this sector.
However, anti-tobacco activists believe that though the government could earn some extra money from the ‘little price rises’ it will ultimately facilitate the tobacco companies. A NBR official, seeking to remain anonymous, said cigarette was a large sector for collecting tax and raising price. “We have found with an analysis that Tk 7,000 crore will be generated as tax only from the price hike in cigarette, which is about 30 percent of the total amount of tax collected from the sector this fiscal,” he said.
The NBR collected a total of Tk 21,976 crore from cigarette business in the fiscal 2017-18. The contribution of the sector to the country’s total revenue generation was 10.67 percent in that fiscal. The government has a target of collecting Tk 325,600 crore as revenue in the upcoming fiscal. NBR officials said though the consumption of cigarette and other tobacco products is harmful for the public health, the government through imposing additional taxes earns a substantial amount of revenue from the sector.
So, the government’s policy is to minimize tobacco consumption by increasing taxes on such products. The proposed budget for the upcoming fiscal suggested the rise in cigarette prices by Tk 5 to Tk 18 for a 10-stick packet based on different tiers. Meanwhile, the NBR, through issuance of an order, said the hiked prices would be effective from June 13, the day of the budget placement for the FY20.
The order said the VAT offices under NBR have to employ more officials, if necessary, to ensure the proper tax collection from the sector after the price hike.
As per the order, the minimum price of a 10-stick packet of the first tier cigarette has been fixed at Tk37, which was Tk32 earlier. The minimum price of the second tier has been increased to Tk 63 from Tk 48, and the third to Tk 93 from Tk 75.
NBR officials said they raised the prices so that all types of taxes including VAT and the Supplementary Duty on cigarette could increase to a great extent as the tax percentages are counted based on the prices. Of the taxes, the SD is the highest tax imposed on cigarette, they informed. According to the NBR order, 55 percent SD is applicable for the first tier of cigarette and 65 percent for the rest tiers.
Besides, 15 percent VAT, and 3 percent regulatory Duty (RD) are also imposed on all tiers. In case of importing cigarette, the traders have to pay a total of 600 percent tax, including 15 percent VAT, 350 percent SD, 5 percent AIT, 3 percent RD and 5 percent advance trade tax. According to NBR sources, the import of cigarette into the country is nominal, as traders have to pay higher amount of tax on the imported products.
This is because the global companies produced cigarettes through setting up their factories abroad so that they can avoid such a higher tax on the export, a NBR official told this correspondent. However, PROGGA and Anti Tobacco Media Alliance (ATMA) stated, immediately after the new budget, that the price would go in favour of the tobacco companies ultimately.
The two anti-tobacco organization said the real price of cigarette would not increase significantly as the price of low-tier cigarettes rose by 15.6 percent, whereas, the per capita income in the country has increased by 11.32 percent this year. Calming the proposed budget as unfavorable for controlling tobacco consumption, they expressed fear that the rate of smoking will not decrease in such a situation. Besides, the government’s goal of making the country tobacco-free by 2040 might not be achieved, they feared.
