Raising tobacco excise taxes is one of the most effective tobacco control measures. However, in a “tiered” tax structure in which similar products are taxed at different rates, the intended impact of tax increases in reducing consumption can be missed. Bangladesh applies a differential tax structure to cigarettes at successively higher rates to four tiers of retail price. A complex tax structure such as this creates large price differentials between high and low-priced cigarettes. Moreover, it provides smokers the opportunity to substitute to cheaper alternatives instead of quitting altogether, as taxes and prices rise. The public health objective of tax increases is thus compromised.

Distribution of Cigarette Smokers by Price Tiers

Recent research led by Dr. Iftekharul Huq shows that “down-trading” (i.e., switching) to lower price-tiers is more prevalent than up-trading to higher price-tiers in Bangladesh. The research also reveals that the intention to quit is lower among smokers who tend to down-trade. Up-trading is generally driven by income growth.

Percentage of smokers switching across years

Raising taxes is not enough in a tiered tax structure. To increase the number of successful quitters and reduce consumption, tax reform is necessary that would apply a uniform tax rate across all tiers.

By Nigar Nargis