The illegal trade of cigarette products is reportedly causing losses of the annual revenue of an estimated Tk 2,000 crore, which is about 10 per cent of the total revenue earning from the tobacco sector, economists and industry insiders said.
A recent World Bank report on Bangladesh said that around 92 per cent of the illicit cigarettes is produced locally by dodging taxes. In this case, infrastructural weakness and negligence of law enforcement agencies are the main reasons for the illegal trade of tobacco products.
In Bangladesh, the market of illegal cigarettes has been rising due to having "complex tax structure", lack of good policy and overall supervision, an economist said adding that the government is not getting the desired revenue from the tobacco sector.
According to the National Board of Revenue (NBR), cigarette is one of the main revenue contributory sectors of the government. At least 10 per cent of the total revenue comes from this sector.
Revenue income in this sector is increasing every year, sources concerned said adding that in the last five years, revenue earning has almost doubled in this sector.
A total of Tk 25,000 crore is likely to be earned from this sector in the current fiscal year. Earlier, the government earned Tk 23,000 crore in 2017-2018 fiscal year, Tk 19,000 crore in 2016-17, Tk 16,000 crore in 2015-16 financial year, sources in the NBR said.
Analysing public and private sector data, it has been found that the government has increased the prices of cigarettes in the past few years in order to prevent the market of illicit cigarettes and reduce the number of smokers. It has also increased revenue earnings. But an illegal trading syndicate is selling cigarettes to the market in different regions of the country by adding fake tax stamps/bandrole to the packets of the cigarette.
Consequently, consumers of low-cost cigarettes are also increasing in the country. Although law enforcement agencies are active in this regard their actions are not enough.
According to NBR, the revenue from cigarettes is mainly realised by three slabs. The number of low segment cigarette consumers is around 70 per cent. Total tax incidence of this segment is 71 per cent. Of this revenue, supplementary duty is 55 per cent, the value-added tax is 15 per cent and health surcharge is 1 per cent. It is mandatory for all companies to add tax stamps/bandrole to each cigarette packet to ensure this revenue.
Apart from this tax stamp or bandrole, it is illegal to sell any cigarette in the market, and the crime is tantamount to the crime of making fake money as per the Special Press Act 1974.
According to economists, illegal trade increases when the rate of tax increases in any sector.
Under the circumstances, the government should take initiative to deploy necessary manpower and set up equipment to stop illegally produced local cigarettes in a bid to increase the revenue earnings in the tobacco sector, they said.
The government should identify the illegal factories which are manufacturing and selling cigarettes by evading taxes, they added saying that all types of machinery of those factories must be destroyed and the persons involved in the processes must be brought under trial.
Besides, the field officials of the NBR will have to play a more active role in this regard, the economists suggested.