Cigarette pricing loophole may cost govt Tk4,062cr in revenue

The government may be losing an estimated Tk4,062 crore in annual revenue due to the existing cigarette pricing mechanism and discrepancies between officially declared retail prices and actual market prices, according to the Power and Participation Research Centre (PPRC).

The estimate was presented at a post-budget press conference on the FY2026-27 budget held at the National Press Club today (22 June).

The briefing, based on an analysis of tobacco taxation policy and market dynamics, said loopholes in the current cigarette pricing and tax structure allow a portion of market transactions to remain outside the government's tax net.

According to PPRC, cigarette taxes in Bangladesh are currently determined based on the government's declared minimum retail price (MRP). In reality, however, most cigarettes are sold as individual sticks, with prices often rounded up to convenient figures.

As a result, retailers are able to charge more per stick than the price implied by the official packet rate. While consumers pay the higher amount, the additional revenue generated is not reflected in the tax base.

Data presented at the conference showed that the official retail price of a 10-stick pack in the low-tier segment is Tk62. However, when sold individually, retailers can charge up to Tk7 per stick. Similar gaps between official and actual retail prices exist in the medium-tier segment.

PPRC said sales of low- and medium-tier cigarettes reached around 61.18 billion sticks in FY2024-25. Given the scale of the market, even a small difference in per-stick pricing translates into a significant amount of untaxed revenue.

According to the organisation, the discrepancy between packet prices and retail prices could cost the government around Tk4,062 crore in revenue.

It stressed that tobacco tax policy should pursue two objectives: reducing smoking and increasing government revenue. However, the current four-tier cigarette pricing structure limits the achievement of both goals.

Because low-priced cigarettes remain relatively affordable, many smokers opt for cheaper brands instead of quitting when prices rise, it said.

To address the issue, PPRC recommended restructuring cigarette price tiers, narrowing the tax gap between low- and medium-tier brands, regulating single-stick sales, implementing a track-and-trace system, and ensuring that actual retail prices are reflected in the tax structure.

Dr Shafiun Nahin Shimul noted that Bangladesh sells around 70 billion cigarette sticks annually, and despite successive price increases, smoking rates have not declined as expected. 

He also expressed concern over emerging nicotine products, noting that nicotine pouches have already received regulatory approval. Bangladesh, he said, should avoid repeating mistakes observed in other countries.

Referring to international experience, Dr Shimul said: "The rapid spread of nicotine products among young people in several countries serves as a warning about the risks of regulatory delays. Bangladesh must act proactively to prevent similar outcomes."

Dr SM Abdullah, associate professor of economics at the University of Dhaka, said the latest budget reflected a shift from curative to preventive healthcare. In line with the policy, the government should adopt taxation regime that help reduce tobacco consumption, he argued. 

Welcoming the government's track-and-trace initiative, he noted that track-and-trace mechanisms are typically applied to cigarette packs, whereas most cigarette sales in Bangladesh occur through individual sticks. As a result, the effectiveness of the system could be limited unless single-stick sales are addressed.

In his closing remarks, PPRC Chairman Dr Hossain Zillur Rahman said tobacco is linked to public health, the younger generation and government revenue.

"If young people are not health-conscious, we will struggle to achieve our expected outcomes in the creative economy and sports," he said.

While acknowledging recent increases in cigarette prices, he said the hikes were insufficient. He also criticised the government's approach to e-cigarettes, saying that despite stricter regulations introduced during the interim government's tenure, the current government has adopted a softer stance and effectively legitimised nicotine pouches by bringing them under the tax regime.

He urged the government to take stronger measures to regulate the market and curb the use of e-cigarettes and other nicotine products.