Stop viewing tobacco sector solely as a revenue source

Whenever tobacco is discussed in Bangladesh, a familiar narrative is repeatedly promoted: tobacco companies are among the country's largest taxpayers. This argument becomes especially prominent during the national budget season. But the real question is, can an industry that pushes hundreds of thousands of people toward death every year, places enormous pressure on the healthcare system, and damages the economy in the long run truly be viewed only as a source of revenue?

The reality is that the government loses far more money due to tobacco-related healthcare costs, productivity losses, and environmental damage than it earns in revenue from the tobacco sector.

Tobacco companies mainly collect taxes from consumers and deposit them into the government. For example, British American Tobacco Bangladesh often publicises that it paid nearly Tk 34,000 crore in taxes in 2024. However, only 5.27% of that amount came from direct taxes or corporate income tax; the remaining 95% consisted of indirect taxes paid by consumers. In other words, it is ordinary people—not tobacco companies—who are actually paying these taxes.

Moreover, the economic losses caused by tobacco greatly exceed the revenue generated from it. According to research conducted by the Johns Hopkins Bloomberg School of Public Health, the health and environmental damages caused by tobacco use and production in 2024 amounted to nearly Tk 87,000 crore. During the same period, tobacco revenue stood at around Tk 40,000 crore. This means the economic losses were approximately 115% higher than the revenue earned from tobacco.

If the money currently spent on tobacco were instead invested in education, nutrition, healthcare, or other productive sectors, those expenditures would also contribute to the economy and generate revenue for the government. Therefore, the propaganda that "tobacco companies contribute huge revenue" should not be used to conceal the public health risks caused by tobacco.

One of the most alarming public health concerns is that Bangladesh is now among the countries with the highest rates of tobacco use in the world. According to the Global Adult Tobacco Survey (GATS) 2017, Bangladesh has the highest tobacco use rate in South Asia at 35.3%. In comparison, the rate is 28.6% in India and 19.1% in Pakistan. Nearly 37.8 million people in Bangladesh use tobacco, and around 200,000 people die every year from tobacco-related diseases. The Tobacco Atlas 2025 further reports that tobacco is responsible for approximately 18% of all deaths in the country.

Despite this devastating reality, cigarettes in Bangladesh remain extremely cheap and easily accessible.

The biggest reason behind this accessibility lies in the country's existing tobacco tax structure. At present, cigarettes are categorised into four price tiers: low, medium, high, and premium. This multi-tiered ad valorem tax system has become a major obstacle to effective tobacco control. Even when prices increase, consumers can easily switch from one tier to another, a cheaper category instead of quitting smoking altogether. As a result, smoking rates do not significantly decline; rather, the market for cheap cigarettes continues to expand.

According to data from the National Board of Revenue (NBR), low-tier cigarettes accounted for 25% of the market share in the fiscal year 2006–07. By 2023–24, this share had increased dramatically to 76%. In other words, Bangladesh's cigarette market is becoming increasingly dependent on cheap cigarettes. Young people and low-income groups are the primary victims of this system, as low-priced cigarettes remain easily affordable for them.

The problem is further intensified because Bangladesh uses the retail price of tobacco products as the tax base. However, the base price of cigarettes in the country is so low that even though the tax rate may appear relatively high, the existing tax structure fails to effectively reduce cigarette consumption or substantially increase revenue.

According to the World Health Organisation's Global Tobacco Epidemic Report 2025, Sri Lanka has the highest cigarette price among 186 countries, where a pack of 20 cigarettes costs 34.38 USD with a tax rate of 68.37%. Bangladesh, on the other hand, ranks 152nd in terms of cigarette prices. Here, the same pack costs only 3.48 USD, despite having a tax rate of 58.4%. This demonstrates that although Bangladesh's tax rate is not particularly low, the low base price allows cheap cigarettes to remain widely available in the market.

Within this context, tobacco companies frequently deploy another common tactic: they claim that increasing tobacco taxes or prices will lead to higher levels of illicit trade and smuggling. However, available evidence presents a completely different picture. According to the World Bank, the illicit cigarette trade rate in Bangladesh is only 1.8%, compared to 17% in India, 38 % in Pakistan, and 36% in Malaysia. Therefore, there is no direct relationship between higher taxes and increased smuggling. Attempts to use the fear of illicit trade to block effective tobacco taxation are essentially strategies designed to mislead policymakers.

Another important issue is that cigarette prices have not increased proportionately with inflation and income growth. Between 2016 and 2022, household income in Bangladesh increased by 103%, while per capita income rose by 93%. During the same period, the prices of essential commodities also increased significantly.

According to the Department of Agricultural Marketing, compared to July 2021, by July 2023 the prices of unpackaged sugar increased by 89%, potatoes by 87%, loose flour by 75%, pangas fish by 47%, eggs by 43%, soybean oil by 34%, powdered milk by 30%, and broiler chicken by 27%. Yet cigarette prices across different tiers increased by only 6 to 15% during the same period. Particularly in the low-tier segment, cigarette prices failed to keep pace with inflation and income growth, making cigarettes even more accessible to young people and low-income consumers.

Given this reality, increasing tobacco taxes in line with inflation and income growth has become more urgent than ever. Bangladesh is currently facing severe revenue pressure due to global energy crises, rising import costs, and a low tax-to-GDP ratio. In this context, the tobacco sector presents a major opportunity for effective revenue reform.

Experts have proposed that in the upcoming national budget for fiscal year 2026–27, the low and medium tiers should be merged, and the retail price of a 10-stick cigarette pack should be set at Tk100. The high tier should be priced at Tk150, while the premium tier should be set at Tk200. Simultaneously, a specific tax of Tk4 per pack should be imposed across all tiers, while maintaining a 67% supplementary duty, 15% VAT, and a 1% health development surcharge on retail prices.

If implemented, these measures could generate more than Tk85,000 crore in revenue from the tobacco sector. At the same time, nearly 500,000 adult smokers would be encouraged to quit, and more than 372,000 young people would be prevented from starting smoking. Therefore, this is not merely a proposal for increasing revenue; it is an effective policy for protecting public health, safeguarding future generations, and reducing pressure on the healthcare system.

Ultimately, it is important to remember that increasing tobacco taxes is not just an economic decision—it is a decision to save lives. Tobacco-related diseases such as cancer, heart disease, stroke, and respiratory illnesses disproportionately affect lower- and middle-income families. When an earning member of a family becomes ill due to tobacco use, the entire household often falls into economic hardship.

For this reason, tobacco control should not be viewed solely as a matter of revenue generation. It must also be recognised as an issue of public health, poverty reduction, and human resource development. Therefore, to advance both public health and the economy together, the national budget for fiscal year 2026–27 should impose higher taxes on tobacco products, increase cigarette prices, and protect future generations from the trap of cheap cigarettes.