Corrupt manufacturers and traders are evading taxes by using imported illegal band rolls or tax stamps on cigarette packets. The government is losing a large amount of revenue every year because of this. Health risks are also increasing as low-quality cigarettes are being sold through the use of fake band rolls. The concerned people are hoping that if the illegal use of band rolls is stopped, the revenue from the tobacco sector will increase and the number of smokers will also decrease.
According to various studies, counterfeit and illegal use of stamps and band rolls in tax collection is losing more than Tk 2,000 crore in revenue every year. Research by the Bangladesh Network for Tobacco Tax Policy (BNTTP) and the Tobacco Control and Research Cell of Dhaka International University also revealed this information about revenue evasion.
According to sources, the biggest source of revenue for the government is the cigarette sector, which generated about Tk 28,000 crores in the last fiscal year, accounting for about 11% of total revenue and one-third of VAT. In Bangladesh, the average price and tax rate of cigarettes is 77%. These taxes include supplementary duty, value-added tax, and health surcharge. Low-quality cigarettes using band rolls are being sold in remote areas at a much lower price than the price fixed by the government. On the one hand, the government is being deprived of revenue, on the other hand, health risks are increasing. Then again, the use of illegal band rolls is increasing in the country in the hopes of making more profit. The minimum price for a 10-stick packet at the lower level has been fixed at Tk 39, of which the government gets Tk 28.47 by levying a total of 73% tax. But if someone sells cigarettes by forging a band roll or a tax stamp, then the marketer’s total profit is Tk 28.47. According to them, the price of cigarettes increases in the budget every year. This results in the market for illegal cigarettes. Before the COVID-19 pandemic, there were 10-12 such factories, now there are more than 25. Such dishonest traders are producing illegal cigarettes locally by evading revenue and choosing remote areas for sale because there is less surveillance. Traders collect and reuse tax stamps from old packets which they procure from the market, and also market cigarettes by forging band rolls or tax stamps using advanced technology.
A review of the price of low-end cigarettes in the last 10 years shows that the price of this level has gone up by almost 400% and this has led to a boom in the illicit cigarette business. Recently, a special team of the customs house at Chittagong port seized a consignment of goods and seized two illegal containers of fake band rolls while unloading a false declaration of ‘A-4 Stationery Paper’. Importing companies have tried to evade revenue of around Tk 143 crores by importing these fake band rolls from China. Later, the customs authority filed a departmental case in the name of the importer, with which various investigating authorities are working.
People in this sector think that enforcement alone is not enough, consistent policy is important. In the 2018-19 budget, when the retail price of low and medium-level cigarettes went up from Tk 3 to Tk 4 and from Tk 5 to Tk 7 respectively, illegal cigarettes started entering the market. As a result of the increase in the price of mid-range cigarettes in the budget announcement of that fiscal year, consumers started leaning towards lower-level and lower-priced illegal cigarettes. However, the NBR chairman imposed a deliberate tax policy on tobacco products considering the revenue collection in the 2021-22 fiscal year.
