Impact Of Price And Tax Changes In The National Budget On The Retail Prices Of Tobacco Products (Cigarette): A Cross Sectional Survey

Introduction

Bangladesh is one of the countries in the world where tobacco products are available at low prices. As a result, the rate of smoking among young people is increasing alarmingly. At the same time, the death toll from tobacco-related diseases is on the rise. According to the World Health Organization, tobacco products, including bidi-cigarette smoke, contain more than 7,000 harmful chemicals, including DDT, carbon monoxide, arsenic, methanol, alkatra, and nicotine, of which 43 are directly linked to cancer.

Worldwide, smoking kills one person every 6 seconds and more than 8.2 million people every year.2 Of these, 7 million people die directly from tobacco use and 1.2 million die from second-hand smoke. Of these, 0.161 million people died in Bangladesh. At present, 80 percent of the world’s 1.3 billion tobacco users are from low- and middle-income countries.

The World Health Organization (WHO) drafted the International Tobacco Control Convention Framework Convention on Tobacco Control (FCTC) in recognition of the dangers of smoking. It effectively bans all forms of tobacco control campaigns, eliminates all smoking in public places and public transport, issues pictorial health warnings on tobacco products, including cigarettes, actively supports tobacco growers in alternative crop production, and the imposition of high taxes and price increases on tobacco products. According to a study by the World Health Organization, a 10 percent increase in prices would save 42 million people from smoking and save the lives of about 9 million people, especially in developing countries.

At the same time, various international studies have shown that raising taxes on tobacco products not only increases revenue but also reduces government spending on health and reduces smoking. This image has already been noticed in different countries of the world including Australia, Thailand, Norway, and Singapore. As a result, it is necessary to impose high taxes on tobacco products regularly every year, but it is not possible in Bangladesh. The main reason for this is non-implementation of specific taxation system on tobacco products.

Bringing all tobacco products including white leaf, jorda, gul under the tax and fixing the minimum price of all tobacco products including bidi-cigarettes will have a direct impact on the consumer. This needs to be implemented quickly. At the same time, keeping in line with inflation, it is necessary to increase the tax on all tobacco including bidi-cigarettes every year. Besides, a policy has to be formulated to increase the tax on tobacco products every year.

Although the prices of nominal tobacco products increase in Bangladesh every year, only tobacco companies benefit from it. If the production doubles, the profit increases at least 5 times. As a result, Bangladesh has not been able to reduce tobacco related deaths due to faulty and complex tobacco tax structure. The most surprising thing is that in the last few years, the prices of daily necessities have increased several times but the prices of tobacco products have not increased at that rate. From which it is clear that the use of tobacco among the people is increasing due to the availability of cheap tobacco products.

In Bangladesh, the price and tax rate of tobacco products are fixed in the budget every year. In this context, there has been no research in the country on how much tobacco companies fix the price of tobacco products and at what price they are sold in the market. By conducting this study in the financial year 2022-23, an attempt has been made to get the answer to the above question. We think that this has made it possible for the tobacco company to unveil its pricing and marketing strategy.

Objectives of the research

The rate at which the National Board of Revenue imposes taxes on tobacco products every year is not enough to reduce tobacco use. Instead, the conventional four-tiered complex tax structure is helping people to use other tobacco products without reducing tobacco use. In order to present a realistic picture in such a situation, it is important to know the extent to which the increase in the price of tobacco products in the current (2022-23) fiscal year has affected the retail and wholesale markets and consumers. Because no such research has been done in Bangladesh. The goals and objectives of this study are generally twofold.

Overall Objective:

Determining the impact of price change in the budget of FY 2022-23 on the market price of tobacco products (cigarettes).

Specific Objectives:

Investigating the impact of the budget on the market prices of tobacco products. Determining the difference between Maximum Retail Price (MRP) printed on the package and actual selling price. Exploring the tobacco companys’ strategies in resetting the prices of tobacco products in the face of rising tax rate and price.

Research Methodology

The research has been conducted following quantitative research methods. Information has been collected from the 48 retail outlets (points of sale vendors) of a total of 12 cities/towns. This includes the divisional cities of Dhaka, Barisal, Khulna, and Mymensingh as well as two additional district towns from each of the divisions. Data has been collected from a total of four retail outletsin each city. These retail outlets have been selected from the public places as defined by the Tobacco Control Act. In this case, the study has been completed with the information from the Sadar Hospital, bus stand, market and retail outlets of each district town or DC office area.

 

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