The National Board of Revenue’s move to change the VAT and Supplementary Duty Act 2012 to offer input tax credit to cigarette companies is likely to bleed about Tk 400 crore annually from the state coffer, said one of its former chairman.
The benefit was left out when the new VAT law was formulated back in 2012. But now, the revenue collector has proposed the change in the Finance Bill 2019.
“This is really very upsetting,” said Nasiruddin Ahmed, former chairman of the NBR, at a press conference at National Press Club yesterday.
The press meet was held by Campaign for Tobacco Free Kids (CTFK), PROGGA (Knowledge for Progress) and Anti-Tobacco Media Alliance (ATMA).
The provision of not offering input tax credit to tobacco companies must be reinstated because the government will lose nearly Tk 400 crore for the change, he said. The change has been proposed at a time when the NBR is routinely lagging far behind its revenue collection target.
In the first nine months of this fiscal year, the tax collector missed its periodic target by Tk 50,000 crore.
“There is no reason at all to offer input tax credit to tobacco companies,” said Nasiruddin, who headed the NBR for four years.
The VAT and SD Act 2012 was drafted during his time and they had decided then to not allow input tax credit to cigarette and alcohol, which are termed as sinful goods because of risks to public health.
Citing his experience at the NBR, he said there must be influences of multinational tobacco companies behind the change.
“I have seen very high conflict of interest here. Some lawmakers and top public officials are directly or indirectly linked with tobacco companies,” he said, adding that sometimes some ministers also tried to influence the tobacco tax structure.
Top officials of some ministries tried to lobby on behalf of the tobacco companies, according to Nasiruddin.
He also lamented the proposed tax measures for cigarettes and tobacco products.
“The prevalence of tax measures based on four price slabs will benefit cigarette companies. This is very frustrating,” he said.
Citing the large price gap between the low and mid-segment of cigarettes, he said smokers will simply move to the mid-priced cigarettes as a result.
The price of cigarette in Bangladesh is very low in comparison to other countries, said Nasiruddin, now a senior fellow at Brac University.
“It appears that we have a budget that will benefit tobacco companies,” he said.
Bangladesh has 3.78 crore adult tobacco users and 1.61 lakh people die every year for tobacco related disease.
The economic cost of use of tobacco was Tk 30,560 crore in fiscal 2017-18, which was higher than the total receipts from tobacco at Tk 22,810 crore, said the ATMA and Progga citing a study.
The prices of low-end cigarettes and bidi would be cheaper, said the anti-tobacco alliance. Consumers will also be able to choose segments because of continuation of four slabs.
Overall, the proposed nominal hike in prices of cigarettes will not contribute to the reduction in smoking, said Nadira Kiron, co-convener of the ATMA.
The income of cigarette companies will increase by up to 31 percent thanks to keeping the supplementary duty unchanged.
Besides, there is a proposal to withdraw the export duty on tobacco.
“This is highly against public health. This measure will only encourage production of tobacco and tobacco products,” Kiron added.
Encouraging export of tobacco is against the spirit of human being, said Qazi Kholiquzzaman Ahmad, chairman of Palli-Karma Sahayak Foundation (PKSF.
This would encourage tobacco cultivation in Kushtia, Bandarbana and Tangail, he said.
The anti-tobacco campaigners recommended that the government fix the price of 10 sticks of low-tier cigarette at Tk 50 from the proposed Tk 37 for next fiscal year and 25 sticks of bidi at Tk 3.
They also demanded reduction of price slab of cigarette to two from existing four, increase in the supplementary duties on all tobacco products and reinstatement of tax on export of tobacco.
Abdul Malik, founder of National Heart Foundation of Bangladesh, also spoke, among others.