Economists suggest increasing tobacco tax, price for budget financing

It is possible to generate an additional Tk11,000 crore in revenue from the tobacco sector by increasing tobacco taxes and prices, which will also reduce tobacco consumption among the people. Then the government can spend the money on bulk allocations and implementing novel coronavirus incentives packages.

This was proposed by economists, journalists and anti-tobacco activists to the government during an online budget response programme on Monday. They also expressed their frustration that the proposed budget for fiscal year 2020-21 does not reflect anything in line with the proposal.

The programme was organised by non-governmental organisation Progga and the Anti-Tobacco Media Alliance at the initiative of 20 anti-tobacco organisations.

Anti-tobacco activists observed that the nominal increase in the price of cigarettes compared to the increase in per capita income in the proposed budget will reduce the actual price of cigarettes and will increase consumption.

They said keeping the supplementary duty on cigarettes almost unchanged for the fourth year in a row will benefit tobacco companies.

They pointed out that keeping cigarette price levels unchanged will allow consumers to choose between brands according to their budgets. Thus, consumption of cigarettes will not decrease.

They said the new budget proposed increasing the price of cigarettes by 5.4 percent, while the minimum income of the people has risen by 11.6 percent. Thus, the actual price of cigarettes will see a reduction.

Anti-tobacco activists have brought forth a proposal to reduce the cost of cigarettes and merge four existing levels into two levels so that people cannot choose between brands according to their budgets.

They demanded only two price levels be available  – premium and low.

For premium, they called for increasing the price of a cigarette, per stick, to Tk12.50. For the low category, they demanded a price of Tk6.50 be set for each cigarette. 

They also proposed removing Beedi's filter and non-filter price division, and increasing supplementary duty on smokeless tobacco products, like jarda and gul.

While public health experts, including the World Health Organisation (WHO), have insisted on reducing tobacco consumption – as it can worsen the pandemic – the proposed budget did not reflect this, the speakers said. As a result, there are now about 40 million tobacco consumers in the country, who are at risk of novel coronavirus infection and other health issues.

They said the proposed tobacco tax and price hike will help generate an additional revenue of up to Tk10,000 crore, and a three percent surcharge on all types of tobacco products at retail level will yield extra revenue of Tk1,000 crore.

It will be possible to prevent premature deaths of the existing 600,000 smokers in the long run and nearly two million adults will be encouraged to quit smoking. At the same time, the risk of a viral infection, including novel coronavirus, will reduce, said the speakers.

Khandaker Ibrahim Khaled, former deputy governor of the Bangladesh Bank, said that excessive reliance on the banking sector for budget financing is not good for the economy at all.

"The government has an opportunity to generate additional revenue from internal sources. We have seen that it is possible to collect an additional revenue of Tk11,000 crore from tobacco products, which can make a significant contribution to budget financing."

At the programme, Research Director of the Bangladesh Institute of International and Strategic Studies Dr Mahfuz Kabir said, "There was an opportunity in the budget to generate additional revenue by increasing the price of tobacco products and also taxes. This is because currently, there is a big revenue deficit."

"There is still an opportunity to increase revenue by levying a three percent surcharge on the retail price of all tobacco products and specific taxes. We hope that considering the threat to public health, the prime minister will definitely increase the tax and price of tobacco in the final budget," he added.

Convenor of the National Anti-Tobacco Forum Dr Qazi Khaliquzzaman Ahmed said the country's development philosophy is now dependent on the market economy and that is why public health is not being prioritised.

"We have repeatedly said that taxes and prices of tobacco products should be increased to protect people from the harmful effects of tobacco, but this was not implemented," he added. 

Manjurul Ahsan Bulbul, editor of TV Today, said, "The prime minister has set a goal to achieve a tobacco-free Bangladesh by 2040. However, the policymakers who will implement it lack goodwill."

Professor of economics at the University of Dhaka Dr Rumana Haque said tobacco use among the people will not decrease until the price level is increased.

Senior Research Fellow of Bangladesh Institute of Development Studies Nazneen Ahmed said, "Poor people are less able to compensate for the health damage caused by tobacco use. So, if they are also discouraged from using tobacco products due to a price increase, they will benefit."