Bangladesh Budget 2022-23: Modest Cigarette Price Increases Will Not Achieve Significant Revenue and Health Benefits

This Policy Brief was written by the Institute of Health Economics at the University of Dhaka in Bangladesh. The policy brief assesses the impact of the recently approved National Budget for fiscal year 2022-23, compared to the alternative proposal developed by tobacco control experts (learn more here).

The reform slightly increases cigarette prices while maintaining the four-tiered ad valorem tax system. Researchers find that this price increase does not keep pace with inflation and income growth, so cigarettes will become more affordable in 2022-23 compared to 2021-22. As a result, cigarette sales are expected to increase by 109 million packs, with an expected tax revenue of 328 billion BDT.

The proposal developed by tobacco control experts on the other hand, would have reduced sales by 71.9 million packs and further increased tax revenue to 393 billion BDT. While the reform will slightly reduce adult smoking prevalence by 0.27 percentage points, the expert proposal would have reduced prevalence by 1.05 percentage points. The policy brief concludes by highlighting the need for larger cigarette tax increases to raise additional revenues and significantly reduce consumption.

Using a tax simulation model, this policy brief assesses the expected impact of tax and price increases on cigarette consumption, tax revenues, and health outcomes. In doing so, this policy brief discusses the potential opportunities lost by the government. This policy brief also compares the effects of the approved tax increase to the effects of
experts’ alternative proposal— a proposal developed by a large group of prominent organizations promoting improved public health and public finance.

KEY POINTS
▪ The recently approved increase in cigarette prices is not enough to achieve significant revenue and health benefits:
• Cigarettes will become more affordable.
• Total tax revenue will increase only by a small amount, and smoking prevalence will go down only by 0.27%.
• In contrast,  the total revenue would have increased by 30% and prevalence would have decreased by 1.05% points.

 

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Institute of Health Economics, University of Dhaka