Reaction to the Measures Proposed in the Budget 2008-09 to Reduce Tobacco Use in the Country
The Honorable Finance Advisor of the Caretaker Government has proposed a number of specific measures to reduce tobacco use from the public health point of view. We think the demands of Unnayan Shamannay, the Bangladesh Anti-Tobacco Alliance, the Ministry of Health, the World Health Organization and other sections of the society to increase taxes on tobacco products have been reflected at least to some extent in the proposals made in the budget.
Three specific proposals have been made in the Budget Speech of the Finance Advisor:
In the interest of public health, proposal to impose supplementary duty of 60 percent on the raw materials for manufacturing of cigarettes and 20 percent on the papers used in producing packaging materials of cigarettes.
Being harmful to public health, manufacturing of scented tobacco (Jarda) and burnt tobacco (Gul) preparations to be brought under the purview of VAT irrespective of their turnover.
Based on the recommendations put forward by Ministry of Health, various anti-tobacco movement organizations and individuals and in the interest of public health, proposal to raise the price structure of cigarettes, tariff value of handmade cigarettes (bidi) and applicable supplementary duty.
No doubt, the above proposals deserve appreciation and we express our cordial gratitude to the Finance Advisor, the NBR Chairman and all other who have been related in the process.
The imposition of supplementary duty on the raw materials of cigarettes and the paper used in the packets will surely increase the manufacturing cost of cigarettes. The normal expectation is that the price of cigarettes will increase substantially. However, to what extent the price will rise depends on how much of the tax burden the tobacco companies will be able to shift on the consumers. The greater the burden is shifted the higher the price will be. But we suspect, the companies will try not to increase the price too much and for that they will try to adjust their manufacturing cost to handle the tax burden. Keeping this in mind, before the budget we demanded a 20 percent indirect tax on the retail prices of all the tobacco products. If that could be done, the total burden of tax would fall on the consumers and there would be no way but to increase the price at a rate equivalent to the tax. We hope, in the future the government will consider this aspect while taxing tobacco.
However, the proposal of increasing supplementary duty only mentions about cigarettes. We thought it was very important to include bidi as well. The consumption of bidi is much higher than cigarettes particularly among the low-income groups of the society. But since bidi is very cheap, everybody can afford it. That is why more emphasis has to be given on bidi in raising the taxes on tobacco. Of course, bringing jorda and gul under the purview of VAT really deserves appreciation. We hope, as a result of this, the use of jorda and gul will decline at least to some extent.
To raise the price structure of cigarettes, tariff value of bidi and applicable supplementary duty is appreciable overall. However, the effect of this will depend on how the task is done. In this case, we expect that the relevant government authorities will consult the anti-tobacco organizations and individuals in preparing this price structure. We too will try to come up with specific proposals regarding this. At the same time, research on what type of relationship should be there between production and marketing of tobacco and the development of the country, particularly the poverty reduction strategy, has to continue. We are committed to continue that work on our own initiatives. However, in these initiatives of ours we expect information and intellectual supports from the NBR and other relevant government bodies.
Overall, the initiative of increasing the price of tobacco through taxation is a very positive aspect of this year’s budget. But a lot more need to be done in this regard, some of which have been mentioned already. It is important to consider the effort of taxing tobacco as a continuous process. Raising some taxes in a single budget will not be effective unless taxes are raised each year to ensure that the real price of tobacco increases consistently and substantially. We will continue our advocacy in this regard to influence and assist the government. Thank you all.
