Experts urge tobacco tax reforms for revenue, health balance

Experts and economists on Wednesday called for comprehensive reforms to Bangladesh's tobacco tax structure, stressing the need for a simpler and more predictable system to boost revenue mobilisation while ensuring long-term sustainability.
They said tobacco tax policy should strike a balance between revenue generation and public health, noting that raising prices in lower tiers could both increase revenue and discourage consumption.
The observations came at a roundtable titled 'Tobacco Tax: Short-term gain vs Long-term sustainability', organised by the Policy Research Institute (PRI) at its Banani office.
Peter Arnold, Partner at Ernst & Young (EY), presented the keynote paper.
The session, opened by PRI Research Director Dr Bazlul Haque Khondker and moderated by Principal Economist Dr Ashikur Rahman, featured insights from a multidisciplinary panel including Dr Mustafa Kamal Mujeri of the Institute of Inclusive Finance and Development, former National Board of Revenue (NBR) member Md Farid Uddin, Dr Mohammad Yunus of BIDS, The Financial Express Editor Shamsul Huq Zahid and Samakal Associate Editor Zakir Hossain.
The speakers underscored the need for a clear, long-term roadmap to simplify the tax structure, strengthen enforcement against illicit trade and ensure predictable policy implementation.
Dr Mustafa Kamal Mujeri said reforms would gain traction if policymakers are convinced that restructuring the system can generate higher and more sustainable revenue, emphasising the importance of evidence-based policymaking.
Dr Mohammad Yunus said tobacco taxation should not be viewed solely from a revenue perspective but also as a public health tool, noting that many countries use such taxes as "sin taxes" to discourage consumption.
He added that illicit cigarette trade is more prevalent in higher-priced segments and highlighted the economic burden of tobacco use, with about 7 per cent of revenue coming from the sector while nearly 12 per cent of expenditure goes to treating tobacco-related diseases.
Md Farid Uddin said Bangladesh's tax policy is largely driven by political authority, with around 80 per cent of revenue coming from indirect taxes that disproportionately affect lower-income groups.
He stressed the need to broaden the tax base and reduce reliance on indirect taxation, alongside separating tax policy from enforcement and adopting a long-term reform strategy.
Shamsul Huq Zahid, Editor of The Financial Express, emphasised that tobacco is a legitimate industry as long as it is treated as an economic sector and called for a pragmatic policy approach.
Noting inconsistencies in government engagement, he said, "When it comes to resource mobilisation, they act efficiently. But when industry players seek to discuss challenges, NBR officials' engagement is often limited."
He said the sector contributes around Tk 400 billion annually to the government exchequer and could generate more if illicit trade is effectively curbed.
Referring to the proposed Tobacco Control Act, likely to be placed in parliament on April 12, he cautioned against abrupt policy changes and stressed the need for a consultative and predictable approach involving policy experts and industry stakeholders.
"The government should involve policy experts and industry participants in decision-making. This will help prevent the expansion of illicit trade and ensure accurate reporting," he said.
He reiterated the need for a consultative and predictable policy framework, noting that millions of farmers and workers depend on the sector.
Zakir Hossain, Associate Editor of Samakal, called for an in-depth assessment by the NBR on shifting from the current ad valorem system to a specific excise regime.
He urged policymakers to evaluate administrative costs, benefits and implementation challenges.
He also called for a phased reform roadmap, saying changes should be gradual and well-sequenced.
He criticised the lack of open discussion on tobacco pricing in budget debates despite the sector's significant contribution to revenue, and urged broader stakeholder engagement, including public health experts and industry representatives.
On illicit trade, he warned that higher taxes could push consumers toward untaxed products if not supported by strong enforcement, calling for more research to better understand the risks.

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