The government plans to establish a maximum retail price for cigarette packs to generate additional revenue, addressing the gap between the price charged by retailers and the printed price on the packet, according to a senior official from the finance ministry.
The printed price of cigarette packets is lower than the amount customers are required to pay, resulting in a loss of revenue for the government, as taxes are calculated based on the printed rate.
For example, a pack of ten premium brand cigarettes, with a retail price tag of Tk 142, should cost Tk 14.2 per stick. However, customers are being charged Tk 16 per stick, potentially losing Tk 18 per pack of ten cigarettes.
Similarly, higher-segment cigarettes are being sold at Tk 12 per stick, while the retail price is set at Tk 11.10.
The National Board of Revenue (NBR) estimates that if taxes were collected based on the retail price, the government could have earned an additional Tk 3,500 crore in revenue from the tobacco industry during the previous nine months until March of the present financial year.
This amount could reach approximately Tk 5,000 crore for a full year.
Officials from the Ministry of Finance aim to establish maximum retail prices in round numbers for cigarette packs, ensuring that each stick is sold at a round figure. This move is expected to protect consumers from higher prices and boost government revenues.
The government plans to set maximum retail prices for all cigarette segments to prevent revenue losses. These proposals were discussed in a recent meeting chaired by Finance Minister AHM Mustafa Kamal. They will be presented to Prime Minister Sheikh Hasina for approval before being included in the budget on 1 June.
In addition to revenue loss, the gap between selling prices and the statutory regulatory order (SRO) prices of cigarettes also leads to inflationary pressure on customers, causing them to pay more than the authorized price.
The meeting also urged the Directorate of National Consumer Rights Protection to take measures against selling cigarettes at inflated prices.
In the current market, premium, high, and mid-segment cigarettes incur a 65% supplementary duty. In contrast, low-segment cigarettes are imposed with a 57% supplementary duty and a 15% value-added tax (VAT). The overall tax incidence on premium, high, and mid-segment cigarettes is 80%, while low-end cigarettes face a 72% levy.
Low-end cigarettes hold a 75% market share as they are more affordable to a broader range of consumers. Zubair argues that applying an equal tax rate to all segments would discourage smoking, protect public health, and generate more revenue for the government.