NBR estimates Tk7,000cr in additional revenue from rising cigarette prices
More than 80% local taxes, 600% on the import level, the budget proposes price increases for cigarettes from Tk5 to Tk18 for a pack of 10 sticks
The government forecast to earn Tk 7,000 crore more just from the rise in cigarette prices in the 2019-20 budget, according to an estimate by the National Board of Revenue (NBR).
The NBR said it would employ a sufficient number of officials to ensure the extra amount of revenue is realized.
However, anti-tobacco activists believe that while the government will earn extra money from “small price hikes”, it will ultimately benefit the tobacco companies.
A senior NBR official, seeking to remain anonymous, said: the sector, âhe said.
NBR collected Tk 21,976 crore from cigarette companies in fiscal year 2017-18. The sector’s contribution to the country’s total revenue generation was 10.67% for the year.
The government has a revenue target of Tk3,25,600crore for the next fiscal year. Although cigarettes and other tobacco consumption are harmful to public health, the government derives substantial revenues from the sector.
Thus, government policy is to minimize tobacco consumption by increasing taxes on them.
The budget proposal, presented to parliament last week, proposed increases in the price of cigarettes from Tk 5 to Tk 18 for a pack of 10 sticks based on different levels for the next fiscal year.
Meanwhile, the BNR, through an ordinance, said the price hike went into effect on June 13, the day the budget was placed.
The ordinance states that VAT offices under NBR should employ more officials, if necessary, to ensure the collection of taxes after prices rise in the sector.
In accordance with the order, the minimum price for a pack of 10 sticks of first level cigarettes was set at 37 Tk, compared to 32 Tk previously.
The minimum price of the second level has been increased to Tk63 from Tk48 and the third to Tk93 from Tk75.
In addition, the revenue collection authorities have proposed a new level setting the minimum price at Tk 123.
NBR officials justify the price hike by saying that all types of taxes, including value added tax and additional duties on cigarettes, will increase to a large extent because of it, as the tax percentages are calculated on the basis of prices.
Among taxes, the Additional Duty (SD) is the highest on cigarettes, they say.
According to the NBR decree, an SD of 55% is applicable for the first level of cigarettes and 65% for the other levels.
In addition, all levels have 15% value added tax (VAT) and 3% regulatory tax (RD).
For the import of cigarettes, traders have to pay 15% VAT, 350% SD, 5% AIT, 3% RD, 5% advance trade tax (AT) and others amounting to 600 %.
Importing cigarettes is nominal because it has very high taxes compared to local productions, a senior NBR official said, adding that global companies produce cigarettes by setting up factories in the country in order to avoid a also high tax rate.
However, PROGGA and the Anti Tobacco Media Alliance (ATMA) said, immediately after the budget was placed, that prices would end up going in favor of the tobacco companies, as a 20 paisa per stick hike would have no impact.
The two anti-smoking organizations said the real price of cigarettes would not increase significantly as the price of low-level cigarettes increased by 15.6%, while per capita income increased by 11.32. %.
Although the prices of other cigarette price points increased more, this would have less impact on the market, as 72% of smokers were in the lower level, they argued.
Calling the proposed budget unfavorable for tobacco control, they expressed concern that the smoking rate would not decrease in such a situation.
In addition, the government’s goal of building a tobacco-free country by 2040 may not be met, they warned.