Illegally produced local cigarettes pose a potential threat to the success the government has made in last few years by increasing the price of cigarettes with an aim to controlling the consumption of tobacco products. A market investigation revealed three types of illegal cigarettes - smuggled cigarettes from abroad, products faking local popular brands and locally produced cigarettes evading taxation. Thanks to the promptness of tax department and administration, the issue of smuggled cigarettes often made headlines. But remote and underdeveloped regions are home to the biggest market of locally produced and tax evading cigarettes. That’s why they hardly come under the surveillance of the law enforcers and government monitoring systems. These cigarettes are marked with fake or reused bandroll or tax stamp. This type is gaining popularity in every corner of the country due to its cheap price and lack of surveillance.
Cigarette is one of the biggest source of the country’s internal revenue generation. In the last fiscal year 2017-18, this sector earned the government nearly Tk 22,000 crore. At the same time, the government has incurred a loss worth 1000 crore owing to the illegal cigarette selling. If this unbounded illegal market keeps going on, it will take a toll not just on the revenue but on people’s health as well, according to experts.
That the government makes the price hike of cigarettes aims at reducing the tobacco consumption. Last four fiscal years marked more than two-fold rise in prices of per packet of cigarettes. This price hike discourages the consumer from smoking and at the same time, catalyze the government revenue generation. As per the price range authorized by the national board of revenue in the fiscal year 2018-19, the price of low-category cigarettes (10-piece packet) increased from Tk 27 to Tk 35. Market visit revealed that the price of each piece of cigarette increased from Tk 3 to Tk 4 thanks to the rise in the price of the packets of low-category cigarettes.
Some local producers are cashing in on the increase of cigarette prices. They use fake/reused tax stamps or bandrolls on the cigarettes sold in different regions of the country and sell each packet at Tk 10-15. As a result, each piece of cigarette sells at only Tk 1 to 1.5. Therefore, one has to enjoy four pieces of cigarettes at Tk 4 while the legal price of 1 piece is Tk 4 alone.
The National Board of Revenue collects the revenue by dividing the cigarette sector in three layers. Among the three layers, the low-category cigarette alone accounts for 70% of all consumers. The government earns a staggering 71% of the revenue (supplementary duty 55% + value added tax 15% + health surcharge 1%). This implies that the government earns Tk 25 from a Tk-35 packet! That’s why the government has made it obligatory to use tax stamp or bandroll on cigarette packets. Any sale of cigarette without this tax stamp or band roll is legally prohibited. On condition of not being named, a senior official of the revenue board said, “Reused or illegally produced tax stamp is a criminal offence. The Security Printing Corporation Limited is the only authorized company to produce this tax. If anyone produces any tax stamp elsewhere that will tantamount to a crime like producing fake money.’
The rise in cigarettes every year and the difference in pricelayers are resulting in the market expansion of illegal cigarettes, according to specialists. Thus the entire selling price of a cigarette packet stands at Tk 10-15, while the Tk 25 was supposed to go for the government revenue alone. Wholesalers and retailers are leaning towards the illegal cigarettes with the aim of maximizing profit. The local market is flooded with different illegal brands of cigarettes. Some of them are - Senor Gold, Senor Gold Pure, Senor Gold Classic, Senor Gold no 1, Senor Gold SR, Super Senor Gold, Desh Black, Top 10, and Fresh Gold. It is to be mentioned that the popularity of brands from place to place. Even Senor Gold alone sells in the name of different brands.
Different producers are selling this brand in different places. But no one knows for sure as to who owns this brand. These cigarette packets are marked with fake/reused tax stamps or band rolls. Thus the illegal cigarette producers have reached the entire country through different wholesalers. Different wholesalers preserve these illegal cigarettes in storerooms before selling those to retailers. Consumers are leaning towards this illegal cigarettes thanks to their lower price.
The way illegal sellers are selling locally produced fake cigarettes will put a dent on the natural market competitiveness and the government revenue as well. On condition of not being named, an NBR official informed that the market for locally produced illegal cigarettes with fake tax stamp or band roll is more prevalent than the one for smuggled or fake cigarettes. According to this information, this tax evasion costs the government around Tk 10 billion.
Our local correspondents observed by visiting different markets that sellers stop selling illegal cigarettes temporarily in the places where drives are conducted.Then then observe the activities of the law enforcers for a week or more. Then they become active within maximum 2 or 3 weeks. They again start selling locally produced illegal cigarettes. Producers of locally produced illegal cigarettes offer the sellers for free the amount of cigarettes lost during the drives. That is why sellers start selling the illegal cigarettes once more.
Bangladesh is the first signatory of the international tobacco control act. The prime minister of Bangladesh has promised to rid the country of tobacco by the year 2041. The government has taken quite a few steps to this goal. But the purpose of increasing cigarette prices is being hindered by the market of locally produced cheap cigarettes. Centering the sale of this illegal cigarettes may grow crimes, terror and drugs. This may lead to social instability and hinder the national security. Therefore, it’s high time for the government to rein it back.