Study: Only 45% smokeless tobacco factories pay taxes in Bangladesh

91% of manufacturers produce SLT products manually in small, unmarked factories or houses

A significant number of smokeless tobacco (SLT) manufacturers of Bangladesh have managed to avoid the government’s tax net, according to a study by the Campaign for Tobacco-Free Kids (CTFK).

The study reveals that among the 483 SLT factories in the country, only 218 pay taxes, reads a press release.

Of the surveyed 88 SLT manufacturers, spanning over 29 districts of the country’s eight administrative divisions, who are out of the tax net, 33% do not even have valid trade licences.

Furthermore, 91% of manufacturers produce SLT products manually and SLT products are manufactured primarily in small unmarked factories or houses, the study found.

Titled “Factors Inhibiting Smokeless Tobacco Tax Payments by Smokeless Tobacco Manufacturers Operating Outside the Tax Net in Bangladesh,” the study was conducted to find out why and how SLT manufacturers escape the tax net and to also present a set of recommendations to plug such holes for preventing revenue losses.

Several anti-tobacco organizations, including the National Heart Foundation, Dhaka Ahsania Mission, UBINIG, Voice, and PROGGA, jointly organized a webinar on Monday to disseminate the findings of the study with the National Board of Revenue (NBR).

Dr Nasiruddin Ahmed, the leader of the research team and former chairman of the NBR, presented the findings of the study.

Attending as chief guest at the event, Zakia Sultana, NBR member (VAT Audit and Intelligence), said: “SLT use should be reined in for the sake of revenues and public health. Reducing SLT use would also reduce health sector expenditure.”

The total monthly gross turnover of the SLT industry is estimated at Tk2.7 crore, the study found.

It identified the informal nature of SLT production as the main impediment in ensuring tax compliance in this sector.

Several other issues concerning NBR, including lack of trained officials, the organizational structure of field offices, and the outdated equipment and systems also adds to this problem, the study added.

The absence of a fully digitalized and automated tax return processing system as well as the lack of a secure tracking and tracing system also facilitate tax evasion.

To safeguard public health and increase revenue collection, a reform of the SLT tax structure should be undertaken, the study suggested.

Moreover, the price difference between different SLT products should be reduced to curb affordability. The study also pushed for introducing an automated tax return processing system, equipping and training NBR personnel, restructuring NBR field formations, introducing a secure tracking and tracing system (TTS), authorizing local government institutions to bring SLT manufacturers under local tax nets, and not bestowing awards on SLT manufacturers.

Among Bangladeshi adults 15 years and above, 20.6% or 22 million use smokeless tobacco. Among students 13-15 years of age, the prevalence of SLT use is 4.5%.

Despite such high prevalence, in the 2019-20 fiscal year, the SLT sector contributed Tk30.6 crore as revenue — only 0.12% of total tobacco revenue collected that year.

In Bangladesh, SLT manufacturing and marketing are mostly unsupervised and unregulated. As a result, these products remain quite cheap, available, and affordable.

Bringing SLT producers under the tax net will increase the tax revenues from this sector considerably, according to the study.

Md Mustafizur Rahman, the lead policy advisor of CTFK, Bangladesh and former chairman of Bangladesh Chemical Industries Corporation (BCIC), delivered the welcome speech at the webinar.

The discussion session at the webinar was attended by a wide range of senior NBR officials, leaders of the anti-tobacco organizations, and experts including CTFK Research Director Maria G Carmona and CTFK South Asia Programs Director Vandana Shah.

Source: Dhaka Times