United News of Bangladesh

Managing Directors (MDs) of the three major players in the cigarette manufacturing sector have expressed deep concern over the recent fiscal policy revisions, particularly the significant increase in supplementary duties (SD) on the cigarette industry. The MDs of BAT Bangladesh, JTI Bangladesh, and Philip Morris Bangladesh stated that they “feel compelled to publicly express concerns” regarding the revised tax measures, as they expect serious implications that threaten the business sustainability in the country. “While we fully recognise and support the Government’s need to increase internal revenue, we strongly believe that the recent policy changes will have serious long-term consequences for the industry sustainability, the economy, and the livelihoods of millions who depend on it.” they said in a statement. A recent Oxford Economics report highlights that in FY 2022-23, the cigarette industry contributed BDT 346.4 billion in tax receipts, accounting for 11.6% of Bangladesh’s tax revenues, which is almost 10 times higher than the global average of tobacco tax accounting for 1% of nation’s tax revenues. It also noted that the largest FDI inflow in 50 years occurred when Japan Tobacco International acquired Dhaka Tobacco Industries for approximately USD 1.5 billion. The report further mentioned the societal contribution the industry made locally, supporting an estimated 1.6 million jobs in Bangladesh. Industry leaders raised their voice that the tobacco industry has become one of the country’s highest revenue-generating sectors that has aided the economy in times of crises, providing a double-digit growth in revenue year-on-year. In 2023-24 fiscal year alone, the industry contributed approximately Tk 40,000 crore in revenue, 16 per cent up from the previous year’s contribution. In the last decade, the tax rates in the tobacco sector have increased substantially in Bangladesh, from 66% of the retail price in 2014 to 77% in 2024. Within six months since the last tax increase by the Government, the National Board of Revenue (NBR) has increased the tobacco tax rate to even higher 83% of the retail price for the whole market this January. This change was announced and implemented without any formal industry consultation. The industry predicts that the latest tax hike will lead to a decline in volume and margin of the legitimate industry – adversely impacting the livelihoods of 4.4 million people across the value chain, including over 150,000 farmers, 1.3 million retailers and labourers in the country. In addition to the tobacco tax increase, the cigarette industry in Bangladesh pays another 47.5 per cent corporate tax, which is one of the highest in the world. The three tobacco industry leaders make up approximately 90 per cent of the total industry in terms of revenue contribution in Bangladesh. The three MDs further expressed their disappointment with the lack of consultation and abrupt policy change. They said, “Despite having the largest and one of the oldest Foreign Direct Investment (FDI) in this sector, the industry was blindsided with the latest policy change, which creates a perception of policy inconsistency and ultimately impacts both domestic and international investor confidence in a negative way.” Monisha Abraham, Managing Director, BAT Bangladesh, remarked, “As the highest taxpayer of the country and a publicly listed company, it is extremely concerning for us to see such significant excise increase in only a span of seven months. This, coupled with increasing cost of sales, will threaten industry sustainability. Furthermore, the troubling departure from established policymaking norms, such as stakeholder consultation, sends out a negative signal on the business climate of the nation.” Paul Holloway, Managing Director, JTI Bangladesh, said “JTI is a recent and significant investor in Bangladesh, with JT Group investing around $2 billion in the last six years. A cornerstone of attracting and retaining foreign investment is providing a sustainable and predictable business environment. Sudden changes in tax levels without proper industry consultation, especially when introduced with immediate effect, are contrary to this principle. We urge the government to engage the industry in meaningful discussions to create a taxation model that meets government revenue targets, provides a fair operating environment for tax-paying companies, and includes a calendar of annual increases. With this in place, all parties will benefit.” Reza-ur-Rahman Mahmud, Managing Director, Philip Morris Bangladesh, added, “The government should consider implementing a structural reform to the existing tobacco taxation system, focusing on long-term sustainability and predictability. Rushed decisions, such as the drastic excise increase and the significant import duty hike for unmanufactured tobacco, move in the opposite direction. Moreover, the import ban on Electronic Nicotine Delivery Systems (ENDS), which are legally available in more than 90 countries, ignores scientific evidence and restricts the access of adult smokers to better alternatives, to the detriment of public health.” The MDs have urged the government to reverse recent SD increases, develop a long-term fiscal roadmap to prevent further shocks for the industry, and ensure meaningful stakeholder consultation to craft sustainable policies. “We do believe there is a way to embed a long-term fiscal policy for this sector that will continue to protect the Government revenue, local job opportunities, and FDIs to contribute to the economic growth of the country. At the same time, we advocate a sensible fiscal policy that does not put excessive burden to the consumers, which would enable tax and price increases in line with what consumers can afford. We stand ready to continue working with the government to find future-fit solutions that ensure sustainable revenue generation as well as industry sustainability,” they said.

The incessant interference from tobacco industry has put the public health of Bangladesh under a greater risk as the country's score in the 2021 Tobacco Industry Interference Index stands at 72 which was 68 last year, as per a study. PROGGA, a research and advocacy organization conducted the study on ‘Tobacco Industry Interference Index: The FCTC Article 5.3 Implementation’. The study report was revealed at an event jointly arranged by PROGGA and Anti-Tobacco Media Alliance (ATMA) in the city’s CIRDAP Auditorium, said a press release. Read: Speakers for amending Smoking and Tobacco Usage (Control) Act As per the report, the implementation of World Health Organization (WHO)'s Framework Convention on Tobacco Control (FCTC) and also the realization of Bangladesh's vision for becoming a tobacco-free country by 2040 are hindered due to aggressive activities of tobacco companies during the Covid-19 pandemic. Speaking at the event, Chairman of the Parliamentary Committee on Environment, Forestry and Climate Changes Saber Hossain Chowdhury said tobacco claimed more lives than Covid-19. “Tobacco is killing more people than COVID-19. Nonetheless, the government is yet to take effective tobacco control measures. The question arises whether the government bodies really hold the spirit of FCTC and the PM's vision of a tobacco-free country,” he said. Convener of the National Anti-Tobacco Platform and also eminent economist Dr Qazi Kholiquzzaman Ahmad said Bangladesh has made very poor performance in the Global Tobacco Industry Interference Index. “We also scored the poorest among our South Asian peers. Why did we perform so poorly?" he said. To improve the situation, he demanded divestment of the government's share in BATB and reinstatement of 25% export duty on tobacco.  Read: Raise tobacco prices, taxes: Activists Noted journalist Monjurul Ahsan Bulbul said the government bodies need to be sensitized for not receiving any aid from tobacco industry. “Receiving donations from the tobacco industry is a clear violation of FCTC as well as in conflict with the declaration of the Prime Minister,” he said. The study findings show that interference from tobacco companies has increased during January 2020-March 2021 and there has been no progress in the implementation of FCTC Article 5.3 Guidelines. The tobacco industry's attempts were seen to interfere and exert influence in policy-making via diplomatic channels during the period , as per the report.

Government's policy agenda in Bangladesh is still highly vulnerable to the interference of the tobacco industry, according to a study report revealed on Saturday.