The country's tobacco taxation system may go through a major overhauling process in the budget for the next fiscal year (FY), 2016-17.
The government has moved to eliminate the existing price slab system, widely criticised by the experts and stakeholders concerned, and introduce regular tax rates for tobacco items.
Finance Minister A M A Muhith has recently instructed the National Board of Revenue (NBR) to revise the existing tobacco taxation system.
"Existing tobacco tax system has to be completely overhauled next year. Slab-based tax will not exist," Mr Muhith wrote in a note to NBR.
He also instructed the revenue board to start work in this regard from now on, and change its traditional concept of tobacco taxation.
The finance minister also asked the tax authority to discuss the issue with the Policy Research Institute (PRI), according to the note.
The current tobacco tax structure in Bangladesh is complex. Supplementary Duty (SD) is imposed on products according to their prices. The SD varies across tobacco products and brands. Cheaper brands have much lower tax rates than expensive ones.
The cigarette tax structure is a tiered one that imposes different as-valorem taxes, based on retail price slabs. 'Bidi' is taxed at a much lower rate, based on a single 'tariff value' set by the government.
Tobacco prices in Bangladesh are among the lowest in the world, and those of 'bidi' are even cheaper.
As per the current budget, excise taxes on the most sold brands of cigarette are approximately 61 per cent of their retail price. 'Bidi' taxes account for approximately 11 per cent of retail prices, and taxes on smokeless tobacco products are approximately 19 per cent of retail prices.
Tax rates on the tobacco products have been increased to some extent. But the latest rates still fall well below the level in the countries with strong tobacco control policies. There excise taxes typically account for more than 70 per cent of retail prices.
Bangladesh is the first signatory country of the International Framework Convention on Tobacco Control (FCTC) of World Health Organisation (WHO).
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