More than 80% local taxes, 600% at import level, budget proposes cigarette price hikes by Tk5 to Tk18 for a 10 stick packet
The government has planned to earn Tk7,000crore more only from the rise in cigarette prices in the budget for fiscal year 2019-20, according to an estimate of National Board of Revenue(NBR).
The NBR has said they will employ adequate number of officials to ensure that the extra amount of revenue is realised.
However, anti-tobacco activists believe that though the government will earn some extra money from the “little price rises”, it will ultimately benefit the tobacco companies.
A senior official of the NBR , seeking not to be named, has said: “We have found in an analysis that a Tk7,000crore revenue will be generated only from the cigarette price hike, which is about 30% of the total amount collected from the sector,” he said.
NBR has collected Tk21,976crore from cigarette business in FY2017-18. The contribution of the sector to the country’s total revenue generation was 10.67% in the fiscal.
The government has a target of Tk3,25,600crore revenue income in the upcoming fiscal. Though cigarette as well as other tobacco consumptions are harmful for public health, the government earns a substantial amount of revenue from the sector.
So, the government policy is to minimize tobacco consumption by increasing taxes on those.
The draft budget, placed before parliament last week, proposed the cigarette price hikes by Tk5 to Tk18 for a 10 stick packet based on different tiers for the upcoming fiscal.
Meanwhile, the NBR, through issuance of an order, has said the hiked prices took effect on June 13, the day of budget placement.
The order says the VAT offices under NBR have to employ more officials, if necessary, to ensure collection of taxes after the price hike in the sector.
As per the order, the minimum price of a 10-stick packet of the first tier cigarette has been fixed at Tk37, which was Tk32 earlier.
The minimum price of the second tier has been increased to Tk63 from Tk48 and the third to Tk93 from Tk75.
Besides, the revenue collecting authorities proposed a new tier fixing the minimum price at Tk123.
NBR officials justify the price hike saying that all types of taxes including value added tax and supplementary duty on cigarette will increase to a great extent because of this as the tax percentages are counted based on the prices.
Of the taxes, the supplementary duty (SD) is the highest on cigarette, they say.
According to the NBR order, a 55% SD is applicable for the first tier of cigarette and 65% for the rest tiers.
Besides, all the tiers have 15% value added tax (VAT) and 3% regulatory tax (RD).
For importing cigarette, the traders have to pay 15%VAT, 350% SD, 5% AIT, 3% RD, 5% advance trade tax (AT) and others totalling to 600%.
Cigarette import is nominal, as it has a very high taxes compared to the local productions, says an NBR senior official, adding that global companies produce cigarettes setting up factories in the country so that they can avoid such a higher tax rate.
However, PROGGA and Anti Tobacco Media Alliance (ATMA) stated, immediately after the budget placement, that the prices would go in favour of the tobacco companies ultimately as 20-paisa hike per stick would have no impact.
The two anti-tobacco organization said the real price of the cigarette would not increase significantly as the price of low-tier cigarettes rose by 15.6%, whereas the per capita income increased by 11.32%.
Though prices for other tiers of cigarette prices increased more, that would have less impact on the market, as 72% of smokers were from the low-tier, they argued.
Terming the proposed budget unfavourable for controlling tobacco, they expressed fear that the rate of smoking would not decrease in such a situation.
Besides, the government’s goal to build a tobacco-free country by 2040 might not be achieved, they cautioned.