Hike in low-segment to help protect health, boost revenue

FE REPORT | Published: April 04, 2022 23:36:29

The hike in prices of cigarettes reduces smoking among the low-income population, a study jointly done by the Ark Foundation, Bangladesh and Tobacconomics of University of Illinois at Chicago has found.
Smoking will drop by 9.0 per cent among the lower-income groups if cigarette prices are raised by 10 per cent, the study said.
In addition to gaining positive health impacts, the hike in prices of the low-segment cigarettes that hold an overwhelming 75 per cent share of the market will help boost government's revenue earning.
Revenue growth in the cigarette sector in Bangladesh had been typically 10-15 per cent a year, but has dropped in the last three fiscal years. In FY 2020-21, revenue from the sector was Tk 285 billion, and in FY 2021-2022, it is expected to be around Tk 297 billion. That is an increase of merely 4.0 per cent, far lower than the typical growth.
Experts say that the loss in revenue is a result of minimal increase in price for the low-tier cigarettes. In the last three fiscal year, the low-tier cigarette price has increased by only Tk 2.0, from Tk 37 in 2019-20 to Tk 39 in 2021-22, resulting in the government losing critical revenue income. If the slack continues, it will have tremendous impact on domestic revenue, analysts fear.
"To mitigate risks to public health and to discourage smokers in the lower-income group the price of low-tier cigarettes must be raised. At the same time increasing low-tier cigarette price from Tk 5.0 to Tk 6.0 will increase revenue by Tk 45 billion," said Shafiun Nahin Shimul, Associate Professor of the Institute of Health Economics of Dhaka University.