Sri Lanka's tobacco tax model could guide Bangladesh: Experts
Experts say shifting from Bangladesh’s ad valorem system to specific taxation could help raise cigarette prices, curb tobacco use and increase government revenue.
Sri Lanka's experience with specific taxation on tobacco products could provide a model for Bangladesh to strengthen tobacco control and boost government revenue, experts said at a webinar today (25 August).
They said Bangladesh's cigarette tax structure remains heavily dependent on ad valorem taxation, allowing manufacturers greater influence over the price base. In contrast, Sri Lanka applies a significant specific tax based on cigarette length, with VAT imposed separately.
The experts made the remarks at the webinar titled "Advancing Tobacco Tax Policy and Price Measures: Lessons from Sri Lanka", jointly organised by the Bureau of Economic Research (BER) of the University of Dhaka, Bangladesh Network for Tobacco Tax Policy and Take Turn Foundation, Sri Lanka.
Keep updated, follow The Business Standard's Google news channel
Prof Dr Nasiruddin Ahmed, former chairman of the National Board of Revenue, said tobacco contributes nearly 10% of Bangladesh's total tax revenue, but the sector's tax structure has several structural weaknesses, including multiple cigarette and bidi tiers and flaws in smokeless tobacco taxation.
Raj Prabu Rajakulendran, lead economist at Verité Research, Sri Lanka, said about 70% of the tax imposed on cigarettes in Sri Lanka is specific taxation based on cigarette length, with VAT applied separately.
He said Sri Lanka's experience showed that higher tobacco taxes can increase government revenue. After the country introduced specific taxation in 2016, cigarette taxes rose by nearly 60%, while government revenue from the sector increased by around 50%.
Dr Nishan de Mel, executive director of Verité Research, said Bangladesh should significantly increase tobacco prices to discourage consumption. He suggested introducing a specific tax, such as Tk15 per cigarette, while retaining existing price-based taxes.
"The specific tax should be added on top of the existing taxes," he said, warning against replacing ad valorem duties with specific taxation, a move that could reduce the revenue and health benefits of reform.
Asitha Dharshana Fonseka, director of Take Turn Foundation, said higher tobacco taxes could generate additional revenue for public health spending and reduce pressure to increase taxes on essential services.
Other speakers stressed the need to prevent tobacco industry interference in policymaking and strengthen Bangladesh's evidence-based approach to tobacco taxation.
BER Project Director Hamidul Islam said the country's goal of becoming tobacco-free by 2040 would be difficult but achievable through coordinated efforts and lessons from Sri Lanka.
The webinar was attended by around 70 public health experts, economists, researchers, tobacco control specialists and journalists from Bangladesh and Sri Lanka.
