BANGLADESH: Illicit Tobacco Trade

In step with the country’s notable recent tobacco taxation reforms, Bangladesh is taking action to fight the illicit tobacco trade. Bangladesh currently has a low estimated illicit cigarette trade incidence (2 percent), compared to estimated global rates of 10-12 percent. Annual revenue losses from illicit cigarette trade are about Taka 8 billion ($100 million), or around 4 percent of total tobacco revenues. It is crucial to keep the illicit cigarette trade
from expanding.

Bangladesh has established a strong legal and institutional foundations for tackling illicit tobacco. The Ministry of Health (MoH) has responsibility for setting, implementing, and monitoring health-related tobacco policies, while the Ministry of Finance (MoF) has primary responsibility for tobacco taxation and oversees the fight against illicit tobacco trade. Within the MoF, primary responsibility for illicit tobacco rests with the National Board of Revenue (NBR).

Cigarette taxation in Bangladesh is enforced through the cigarette stamp and banderole system, introduced in 2002. This system, together with control of smuggling and tightening of cigarette intelligence, has helped keep the illicit cigarette trade in check. Illicit trade incidence for biri (cheap, hand-rolled cigarettes) is unknown owing to lack of
data. However, industry intelligence reports suggest that the incidence of illicit biri trade could be significantly higher than for cigarettes. Despite the likely high volume of illicit biri trade, the revenue loss is presently not significant owing to the low effective tax rate for biri. However, recent reforms have for the first time aligned the biri tax base to the products’ actual retail price. This change, coupled with a projected increase in the biri tax rate to match the rate for cigarettes, will raise the opportunity cost of illicit biri trade in Bangladesh.

 

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