Economic Reporter :
1 lakh 26 thousand people die every year in Bangladesh from health complications related to cigarette smoking. Over 15 lakh people suffer from various illness because of smoking and 61 thousand children suffer from diseases caused by second-hand smoking.
75% of the country’s smokers are low-tier cigarette consumers. The rest of the cigarette market share are held by mid-tier (10%) and top-tier (15%) cigarette products. Given the dominance of the market by the low-tier, raising the price for this segment can have enormous positive impact on both revenue income and public health.
A study by Ark Foundation, Bangladesh and Tobacco-economics of University of Illinois at Chicago found that raising prices of cigarettes reduce smoking among the lower-income population. Smoking will drop by 9% among the lower-income groups if cigarette prices are raised by 10%.
Aside from the public health impact, raising price for the segment that holds an overwhelming 75% majority of market share will boost government’s revenue earning.
Revenue growth in the cigarette sector in Bangladesh had been typically 10-15%, but has dropped in the last three fiscal years. In FY2020-21 revenue from the sector was Tk28,500 crore, and in FY2021-2022 will be the same.
Experts say that the loss in revenue is a result of minimal increase in price for the low-tier cigarettes. In the last three fiscal year the low-tier cigarette price has increased only Tk2, from Tk37 in 2019-20 to Tk39 in 2021-22, resulting in the government losing critical revenue income. If the slack continues, it will have tremendous impact on domestic revenue, analysts fear.
“To mitigate risks to public health and to discourage smokers in the lower-income group the price of low-tier cigarettes must be raised. At the same time increasing low-tier cigarette price from Tk5 to Tk6 will increase revenue by Tk4,500 crore,” said Shafiun Nahin Shimul, Associate Professor of the Institute of Health Economics of Dhaka University.
For public health considerations, the National Board of Revenue policy is against increasing volume for cigarettes. This leaves no other option but to raise prices for low-tier cigarettes in order to regain the revenue income.
