Raising tobacco taxes in Bangladesh in FY 2018- 2019: an opportunity for development

Raising tobacco taxes in Bangladesh in FY 2018- 2019: An opportunity for development Raising tobacco taxes would: • Generate extra revenues between BDT 75 billion and 100 billion. • Reduce the number of current adult smokers (both cigarettes and biris) by 6.4 million in the next 3 years, preventing at least 2 million premature deaths over the long term. WHO/NMH/PND/18.6 © World Health Organization 2018 Some rights reserved. This work is available under the Creative Commons Attribution-NonCommercial-ShareAlike 3.0 IGO licence (CC BY-NC-SA 3.0 IGO; https://creativecommons.org/licenses/by-nc-sa/3.0/igo). Under the terms of this licence, you may copy, redistribute and adapt the work for non-commercial purposes, provided the work is appropriately cited, as indicated below. In any use of this work, there should be no suggestion that WHO endorses any specific organization, products or services. The use of the WHO logo is not permitted. 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This document is available electronically at www.who.int/tobacco Any queries regarding this document should be address to: tfi@who.int Raising tobacco taxes in Bangladesh in FY 2018-2019 Bangladesh is one of the largest tobacco consuming countries in the worldi ii: • 43.3% of all adults (age 15+) use tobacco; • 23.2% smoke tobacco; 31.7% use smokeless tobacco. Tobacco use in Bangladesh is deadly and costly: • It is a leading risk factor for disease and deathiii: • In 2016, tobacco use killed more than 160,000 people, including 26% of deaths among men and 10% among womeniv; • The total economic cost of tobacco use from lost productivity and direct healthcare costs of smoking related illnesses is BDT 158.6 billion or 1.4% of Bangladesh’s GDPv. The current tobacco tax structure in Bangladesh is complex and does not discourage tobacco usevi: • A complex multi-tiered ad-valorem excise tax which includes large variations in tax bases and tax rates depending on the type of tobacco product (cigarettes, biris, and smokeless), the product characteristics (filter or without filter) and the cigarette brand type (low local, low international, high and premium); • The multi-tiered tax system for cigarettes has resulted in: o smokers switching to cheaper cigarettes instead of quitting; o extremely cheap and affordable cigarettes vii; o rising cigarette sales in recent years; o a relatively constant smoking prevalence in recent years. • Low taxes on biris and smokeless tobacco keep these products highly affordable vii. Raising taxes in Bangladesh would save lives and increase Government Revenue The most effective way to reduce tobacco use is to raise the prices of tobacco products through tax increases that lower their affordability. Higher prices discourage youth from initiating tobacco use and encourage current users to quit. If the Government of Bangladesh reforms the current tobacco tax system following the recommendations for the FY 2018-2019 proposed in Tables 1 to 3 below, it would: • Encourage nearly 6.4 million current adult smokers to quit (3.1 million cigarettes smokers and 3.3 million biri smokers); • Reduce the prevalence of cigarette smoking by 2.7% and the prevalence of biri smoking by 2.9% • Reduce premature deaths by 2 million among current smokers in the long term (1.1 million cigarette smokers and 938,650 biri smokers); and • Generate between BDT 75 billion and 100 billion (or 0.4 % of GDP) in additional tax revenue. This additional revenue could be used to fund several new or existing programs to reduce the harms of tobacco use, prevent premature deaths and promote healthy lives. Following these tax recommendations would greatly further economic development and align tobacco tax policy in Bangladesh with global best practices: • Harmonization and transparency of the tax base across tobacco products so that the tax base for the supplementary duty on all tobacco products is the retail price. • Simplification of the tax system by reducing the number of cigarette price slabs from four to two and eliminating distinctions between product characteristics for biris and cigarettes. • Introduction of a specific excise tax that should be regularly increased over time beyond inflation and income growth to ensure that the affordability of tobacco products continues to decline. • Reduction in price gaps between tobacco products and brands to limit the ability of tobacco users to substitute between products. TABLES 1 to 3: Taxation and Maximum Retail Price (MRP) of tobacco products, Current FY 2017-2018 and Proposal for FY 2018-2019 Table 1. CIGARETTES CURRENT Tax Structure 2017-2018 PROPOSED Tax Structure 2018-2019 Tier Retail price of 10-stick pack (Taka) SD* VAT* Health Development Surcharge* Tier Retail price of 10-stick pack (Taka) SD Specific Component SD* VAT* Health Development Surcharge* Total tax share on retail price (%) Low tier (local brand) 27.00 52% 15% 1% Lower tier 50.00 5.00 60% 15% 1% 86% Low tier (int’l brand) 35.00 55% High tier 45.00 + 63% Upper tier 100.00 + 5.00 60% 86% Premium tier 70.00 + 65% *Tax base: Maximum Retail Price Table 2. BIRIS CURRENT Tax Structure 2017-2018 PROPOSED Tax Structure 2018-2019 Tier Retail price (Taka) SD* VAT* Health Development Surcharge* Tier Retail price (Taka) SD Specific Component SD* VAT* Health Development Surcharge* Total tax share on retail price (%) Without filter, 25 stick pack 0.50 per stick 30% 15% 1% Without filter, 25 stick pack 1.20 per stick 0.24 per stick 45% 15% 1% 81% Without filter, 12 stick pack Without filter, 12 stick pack Without filter, 8 stick pack Without filter, 8 stick pack With filter, 20 stick pack 0.60 per stick 35% With filter, 20 stick pack With filter, 10 stick pack With filter, 10 stick pack *Tax base: Maximum Retail Price Table 3. SMOKELESS TOBACCO CURRENT Tax Structure 2017-2018 PROPOSED Tax Structure 2018-2019 Tax base SD# VAT# Health Development Surcharge# Tax base Retail price of 20 grams (Taka) SD Specific Component (Taka/20g) SD* VAT* Health Development Surcharge* Total tax share on retail price (%) Zarda Ex-factory price 100% 15% 1% Zarda Maximum Retail Price 50.00 10.00 45% 15% 1% 81% Gul Ex-factory price 100% Gul #Tax base: Ex-factory Price *Tax base: Maximum Retail Price Way forward Bangladesh has expressed its commitment to achieve tobacco-related targets under the Global Action Plan for the Prevention and Control of NCDs and the Sustainable Development Goals (SDGs) viiI ix. Raising taxes on tobacco is a cost effective way to reach those targets. It is also a major step towards achieving the vision of a tobacco free Bangladesh by 2040. At the same time, tobacco tax reform will generate significant additional revenue to finance Bangladesh health and development priorities. This is a clear ‘win-win’ for the Government and people of Bangladesh. i World Health Organization. Report on the Global Tobacco Epidemic 2017. Country profile Bangladesh. Available at: http://www.who.int/tobacco/surveillance/policy/country_profile/bgd.pdf?ua=1 ii Global Youth Tobacco Survey (GYTS): Bangladesh report, 2013. World Health Organization; 2015. Available from: http://www.searo.who.int/tobacco/data/ban_gyts_report_2013.pdf. iii Global Burden of Disease Study. Country profile Bangladesh 2017. Available at http://www.healthdata.org/bangladesh iv Global Burden of Disease Study. GHD x GHD Compare Viz Hub Bangladesh. Available at https://vizhub.healthdata.org/gbd-compare/ v Goodchild M, et al. Tob Control 2017;0:1–7. doi:10.1136/tobaccocontrol-2016-053305. Available at http://tobaccocontrol.bmj.com/content/27/1/58 vi Budget documents of Government of Bangladesh 2011-1015. vii Nigar, N. et al. Tob Control 2018 Trend in the affordability of tobacco products in Bangladesh: findings from the ITC Bangladesh Surveys. Available at: http://tobaccocontrol.bmj.com/content/early/2018/04/19/tobaccocontrol-2017-054035 viii United Nations. Transforming Our World: the 2030 Agenda for Sustainable Development. New York, United National General Assembly; 2015. ix World Health Organization. Health in 2015: From MDGs, Millennium Development Goals to SDGs, Sustainable Development Goals. Geneva, World Health Organization; 2015.