Bangladesh could have collected an additional Tk5,182 crore in revenue this fiscal year if cigarette taxes were properly enforced, as widespread price manipulation and tax evasion in the tobacco sector continue to cause significant losses, according to a new study.
The study, titled “Company strategies in controlling the cigarette market and their impact on revenue collection: A survey,” was jointly conducted by the Economic Research Bureau of Dhaka University and the Bangladesh Network for Tobacco Tax Policy.
The findings were presented at a discussion titled “Measures to prevent price manipulation and tax evasion by tobacco companies” held on Thursday at the Dhaka Reporters Unity.
Research Assistant Ishrat Jahan Oishi presented the keynote paper at the event.
According to the study, cigarettes are often sold above the maximum retail price (MRP) printed on packets. While manufacturers supply cigarettes to retailers at the listed price, retailers frequently sell them to consumers at higher prices.
This practice leads to higher market prices than the declared MRP, while the government continues to collect taxes based on the lower printed price.
The research estimates that revenue losses from such practices amount to Tk510.31 crore in the premium tier, Tk124.40 crore in the high tier, Tk1,925.58 crore in the medium tier and Tk2,621.24 crore in the low tier.
Data for the study were collected from 48 retail outlets across 12 cities, including divisional cities in Dhaka, Barishal, Khulna and Mymensingh, along with two district towns.
The study recommended strict enforcement of MRP-based sales and legal action against retailers and companies violating the rules. It also called for digital systems to strengthen tax collection and market monitoring.
Other recommendations include banning the sale of single cigarette sticks, reducing the multi-tier tax structure to a single tier and introducing a specific tax instead of the current ad valorem system.
The study also suggested withdrawing government shareholdings in tobacco companies and exploring alternative sources of revenue.
Experts at the discussion said the revenue loss from overpricing cigarettes is equivalent to the annual budgets of several medical universities in the country.
They noted that the lost revenue could potentially fund nationwide free treatment for heart disease and other health services.
Speakers also warned that selling cigarettes above the printed price and the widespread sale of single sticks are encouraging smoking among young people while also contributing to revenue losses.
They urged the National Board of Revenue to take research-based and effective measures to address tax evasion and strengthen tobacco control.