Existing Tobacco Tax Policy and Tax Administration in Bangladesh: A Qualitative Study

Executive Summary

This report has been developed as part of a research conducted by the Bureau of Economic Research (BER), University of Dhaka with the aim to generate evidence to identify the gaps in Bangladesh’s current tobacco tax policy and tax administration. A qualitative study was undertaken where a series of Key Informant Interviews (KII) of the officials of the National Board of Revenue (NBR) both at central and local levels were conducted to identify these gaps. This report presents the findings of this study based on the information extracted from these interviews.

The findings shed light on the process of tax collection as well as various issues that affect the tobacco tax administration of Bangladesh. These issues include a lack of supply chain monitoring, lack of market monitoring and absence of automation and digitization in the tax collection process. Additionally, the NBR officials also expressed their perceptions regarding many matters of tobacco tax administration, the challenges they faced during tax collection of tobacco products and also recommended some measures that they think should be undertaken to improve the overall tobacco tax collection scenario. The major challenges the officials cited is shortage of manpower that creates obstacles in round-the-clock monitoring which is crucial in the taxation of tobacco products. Many of the responders brought up the problem of counterfeit banderoles and the propensity to avoid taxes by using them. Several respondents talked about the unregulated bidi and SLT (Smokeless tobacco) manufacturing units operating from small rooms and people’s room, especially the recent rise in this kind of bidi factories due to the opportunity of online VAT registration.

To protect the public health and increase the government’s revenue stream, these shortcomings in tax administration and the several concerns in tax management must be urgently addressed and initiatives should be taken to do that. Further research in this sector is needed to build clear understanding of these problems and explore possible best solutions. Digital tax stamps and banderoles should be introduced to better monitor the supply, distribution and sale of tobacco products. The tax collection process needs to be automated and capacity building programs and trainings should be conducted to enhance the overall aptitude of NBR officials.

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Existing Tobacco Tax Policy and Tax Administration in Bangladesh: A Qualitative Study

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Bureau of Economic Research (BER), University of Dhaka