The share of illicit trade in the total cigarette market of Bangladesh is one of the lowest in the world. However, tobacco companies tend to intentionally magnify the extent and impacts of illicit cigarette trade to interfere in the tobacco tax measures, claiming that raising tobacco taxes would lead to influx of illicit cigarettes and massive revenue loss for the government.

Illicit Cigarette Trade in Bangladesh

According to a World Bank report titled Confronting Illicit Tobacco Trade: A Global Review of Country Experiences[1], published in February 2019, reveals that the percentage of illicit cigarette market in Bangladesh stands at merely 1.8 percent which is the lowest in 27 countries included in the report. As per the numbers presented in the report, in the South and Southeast Asian region, illicit tobacco trade constitutes 17 percent of tobacco trade in India, 38 percent in Pakistan, 36 percent in Malaysia and, 15 percent in the Philippines. The estimated revenue loss due to illicit cigarette trade in Bangladesh, the report says, stands at US$ 100 million a year, which is only 4 percent of total tobacco revenues. 92 percent of all illicit cigarettes are locally produced that managed to escape the government tax net.

While the Ministry of Health and Family Welfare (MoHFW) is responsible for setting, implementing and monitoring tobacco policies related to health implications, the Ministry of Finance (MoF), particularly its department National Board of Revenue (NBR) is the lead ministry for tobacco taxation and pricing and overseeing illicit tobacco trade. The Ministry of Home (MoH) also plays a role in enforcement through security agencies such as Police force and Border Guard Bangladesh (BGB). Stamps and banderoles, introduced in 2002,[2] are the major components of controlling illicit tobacco trade in Bangladesh. The existing enforcement mechanisms include surveillance, raids in factories, seizures, check points in ports, and mobile courts. Offences can lead to imprisonment of one to seven years and/or different levels of fines.

Industry Arguments Regarding Illicit Cigarette Trade

Tobacco companies and their association Bangladesh Cigarette Manufacturers’ Association (BCMA) often claim that any increase in tobacco taxes would result in spike in illicit tobacco trade and the government would lose significant amount of revenue as a result. On the other hand, anti-tobacco organizations referred to such claim made by tobacco companies as ‘fear-mongering tactic’, employed to prevent the government from increasing tobacco taxes.  

On 14 April 2017, during a pre-budget meeting between the National Board of Revenue (NBR) and BCMA, Mr. Golam Mainuddin, Chairman of British American Tobacco Bangladesh (BATB), said, “The revenue policy regarding cigarette has led to a spike in influx of illicit cigarettes... NBR and the Police alone cannot put an end to the influx. This should be eliminated through policy. While formulating the budgetary policies, one should keep illicit tobacco trade in mind.” [3]

The similar tactic was found in a letter sent to the finance minister by BCMA. On 15 September 2019, BCMA sent a letter addressed to the Finance Minister, with copies sent to Finance Secretary, Health Services Secretary and Chairman of National Revenue Board (NBR) to raise its objections against the draft National Tobacco Control Policy (NTCP).[4] At the beginning of the letter, BCMA mentioned, ‘...member companies of BCMA have been contributing large sums of revenues to the govt. exchequer throughout the years. In the last FY alone, the govt. earned Taka 28,000 crore from the cigarette industry which stands for almost 12 percent of total internal revenue income of the govt.” BCMA tried to persuade the govt. against raising taxes and prices, claiming “the recent increase in cigarette prices was not at par with the inflation of the economy which eventually led the consumers to tax-evading low-price cigarette brands. Not only do these cigarette brands harm the govt. revenue earnings but also damages the condition of public health.”[5]

Validity of Industry Argument  

The reality, as revealed in multiple studies, does not seem to conform to BCMA’s claim that increased taxes will lead to tax evasion and illicit tobacco trade.

According to the World Bank’s Confronting Illicit Tobacco Trade: A Global review of Country Experiences (2019), the increase in tobacco taxes has barely any relation with illicit trade of cigarettes and the percentage of illicit trade of tobacco in Bangladesh stands at merely 1.8 percent, the lowest in 27 countries.

The 2015 GATS Atlas by World Health Organization (WHO)[6] report found out that Bangladesh is one of those countries where the prices of cigarettes are the cheapest. The report said, “Increasing the price of tobacco products through tax increases is the single most effective way to decrease tobacco use. Higher prices encourage current users to quit and prevent youth from starting. After adjusting for differences in country-level purchasing powers, the average cost of a pack of 20 manufactured cigarettes is $2.7 among 22 GATS countries.” However, according to the report, the cost was only $1.2 for Bangladesh. It shows that the average price of even the cheapest brands of cigarettes is more than twice in India ($2.9 per 20 sticks) than it is in Bangladesh. So, there is no possibility for Bangladesh to experience any kind of influx of smuggled cigarettes even if the prices of cigarettes are significantly increased.

While BATB frequently postulates that raising taxes means increased tax evasion, the company found itself at the centre of tax evasion scandals on numerous occasions. In 2018, NBR accused that British American Tobacco Bangladesh (BATB) evaded BDT 1,863 crore in VAT and supplementary duty in eight months.[7] Previously in August 2017, Bangladesh journalist network the Anti Tobacco Media Alliance (ATMA) revealed that the British High Commissioner in Bangladesh Alison Blake had lobbied on behalf of BATB in a tax dispute with the Bangladesh Board of Revenue (NBR). According to ATMA, BAT owed the NBR unpaid Value Added Tax (VAT) originally worth BDT 1,924 crore.[8]

Illicit Cigarette Trade: A Gateway for Interference?

Cigarette industry in Bangladesh has been using the issue of illicit cigarette trade not only to interfere in the tobacco tax measures of the government but also to form partnership with and influence vital government bodies.

The multinational tobacco company, British American Tobacco Bangladesh (BATB) frequently contacts NBR and its Customs Intelligence and Investigation Directorate (CIID) on illicit tobacco related information exchange. Anti-tobacco organizations repeatedly raise objections regarding the extent of tobacco companies’ influence on NBR. There were a number of instances where tobacco companies brought NBR to lobby on their behalf even on non-revenue related tobacco control policies. For example, in 2019, during the formulation of National Tobacco Control Policy (NTCP), NBR sent a letter to the Ministry of Health, demanding that the draft policy consider opinions raised by tobacco companies.[9] Similar types of interference were found during the formulation of Graphic Health Warning related Rules in 2018. A November 2019 newsletter of Tobacco Industry Watch BD said, “The connection between NBR and tobacco companies is now not limited to tobacco taxation only. Tobacco companies are involving NBR in every aspect of tobacco control. With their well-crafted strategies, the companies are inducing a government body to violate FCTC and hinder the journey toward a tobacco-free Bangladesh.”[10]

According to the Bangladesh Country Report[11] of 2019 World Bank Report Confronting Illicit Tobacco Trade: A Global Review of Country Experiences, “To counter [illicit tobacco trade], the NBR has entered into a partnership with [Bangladesh Cigarette Manufacturers’ Association] BCMA to improve tax compliance.” The report also says, “[BATB] has a strong research and monitoring team that does regular marketing research and surveillance based on field visits. Information is regularly shared with NBR, thereby assisting in the implementation of the tobacco tax laws. Nevertheless, there is a need for NBR to conduct regular independent monitoring of the illicit cigarette trade.” (Page 418)

Such collaboration between NBR and BATB is a grave violation of the Article 5.3 of WHO Framework Convention on Tobacco Control. BATB may conduct its own research and monitoring for commercial purposes. The findings will reflect the company’s commercial purposes. The collaboration between BATB and NBR and subsequent operations raise questions about the authenticity of the findings and impartiality of the process. A Newsletter from Tobacco Industry Watch BD even claimed, “To fish in troubled waters, tobacco companies often stage events in the airports and some other significant areas where massive number of foreign cigarettes get caught. These staged events generally produce a number of media reports and are later weaponized to manipulate the policy-makers. At the same time, tobacco companies use some pseudo anti-tobacco organizations that participate in the anti –illicit tobacco drives of NBR.”[12]

It should be noted that in 2017, the Customs Intelligence & Investigation Directorate of National Board of Revenues (NBR) launched a week-long anti-cigarette smuggling campaign titled ‘Targeting Smuggled Cigarette’ with support from BCMA[13] which had been stopped due to the strong protests from media and anti-tobacco organizations.