Despite a high share of tax in price (greater than the WHO’s 75% benchmark) with periodic tax and price increases, cigarette consumption has been increasing in Bangladesh over the last decade. Between 2006-07 and 2016-17, the volume of tax-paid cigarette sales increased by 83%. At the same time, the share of low-price cigarette consumption increased from less than 30% to nearly 80% of total cigarette sales (Figure 3 in the paper).
A recent Policy & Practice paper entitled, “A decade of cigarette taxation in Bangladesh: lessons learnt for tobacco control” in the Bulletin of the World Health Organization led by Nigar Nargis from the American Cancer Society explores why cigarette tax policy did not have the intended impact in reducing cigarette consumption and generating public health gain in Bangladesh. In addition to growing affordability of cigarettes, three factors appear to have contributed to the growing trend in cigarette consumption which was largely driven by disproportionately larger growth in low-price cigarettes.
First, a multi-tiered tax structure for cigarettes contributed to the outcome. Preferential tax rates for cheaper brands widened the price differential between brands and incentivized downward substitution by smokers from higher-price to lower-price cigarettes.
Second, income growth and shifting preferences of smokers for better quality products encouraged upward substitution from hand-rolled local cigarettes (bidi) to machine-made low-price cigarettes.
Third, the tobacco industry’s market expansion and differential pricing strategy changed the relative price to keep low-price cigarettes inexpensive.
The authors conclude that a high tax share alone may prove inadequate as a barometer of effective tobacco taxation in lower-middle income countries, particularly where the tobacco tax structure is complex, tobacco products prices are relatively low, and the affordability of tobacco products is increasing. A simple and uniform specific tobacco tax structure, that is high enough to affect consumption meaningfully and indexed to inflation and income growth, is a prerequisite for tobacco tax and price increases to be effective in reducing consumption of tobacco products.
Citation: Nargis N, Hussain AKMG, Goodchild M, Quah ACK, Fong GT. A decade of cigarette taxation in Bangladesh: lessons learnt for tobacco control. Bulletin of the World Health Organization. Published Online: 21 January 2019. Available at: https://www.who.int/bulletin/online_first/18-216135.pdf?ua=1