Profits of smokeless tobacco companies may jump more than two-fold in the current fiscal year (FY), 2018-19, following changes in the proposed tax measures in the Finance Act-2018, an anti-tobacco organisation has said.
The government has now fixed the tariff value of smokeless tobacco products, replacing the proposed budgetary measure to impose taxes on retail prices of the items.
Under the new tax measures, smokeless tobacco companies can now increase their profits by 118 per cent, compared to the profits they could have made under the tax measures proposed initially.
Progga, an anti-tobacco advocacy organisation, said this in a budget analysis recently.
On the other hand, the government's revenue earnings from taxes on smokeless tobacco companies will come down by 54 per cent, it added.
In the proposed budget for FY 2018-19, the government had fixed the retail price for Zarda and Gul at Tk 25 for 10 gram with 65 per cent supplementary duty on the retail price.
This proposed measure, if implemented, could help the government raise its revenue collection from this sector by 168 per cent, Progga said.
But the government backed down on its stance at the last moment for reasons 'unknown', it added.
Finally, it has set the tariff value for 10 gram of Zarda and Gul at Tk 12 and Tk 6.0 respectively and imposed 100 per cent supplementary duty on it.
This new measure will cause a loss of revenue to the National Board of Revenue (NBR).
For example, the smokeless tobacco companies will now get Tk 12 by selling 10 gram of Zarda, but they could have earned only Tk 5.24 if the proposed measure remained unchanged.
The government has also scrapped the ex-factory price system for smokeless tobacco companies.
Progga said the government adopted a faulty method of taxation, the tariff value system, by withdrawing ex-factory price system.
Now, the companies will be able to sell Zarda and Gul at a low price due to the introduction of tariff value.
As a result, consumption of smokeless tobacco would not be reduced as desired level, said Progga.
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