BATB's New Friend in Town

PricewaterhouseCoopers (PwC) Bangladesh has made a proposal to increase tobacco tax only on low-tier cigarettes and keep the tax on high and medium tier cigarettes untouched in the upcoming 2019-20 budget. As the logic behind this proposal, the Bangladeshi wing of this international famous service provider company said, the low-tier has not seen any tax increase in recent years as the high and medium-tier have seen. As a result, the cigarette market of Bangladesh is now flooded with low-tier cigarettes and influx of smuggled cigarettes has also seen a rise. This proposal and subsequent recommendations were presented very recently in a pre-budget meeting of economists and professionals arranged by National Board of Revenues (NBR).

However, the reality is that the price of premium-tier cigarettes (Tk. 105 per 10 sticks) was untouched for two years and then it was increased by only 4 percent in 2018-19 FY budget. The increase was 7 percent and 6.5 percent in case of high (Tk. 75 per 10 sticks) and medium (Tk. 48 per 10 sticks) tier cigarettes in the same budget. In reality, it was the low-tier cigarettes that have gone through the maximum rise in price which is 29.6 percent. It should be kept in mind that despite this increase in price, the real prices of cigarettes of most of the tiers have fallen over the years because the per capita income (nominal) has increased more significantly and the increase in cigarette prices was not at par with this, making cigarettes more affordable to the public. The claim of illicit trade of cigarettes is also utterly baseless. The World Bank has, very recently, published a report on illicit trade of cigarettes and among all the 27 countries listed in the report, Bangladesh has the lowest percentage of illicit cigarettes trade (only 1.8 percent). The report also states that illicit tobacco trade constitutes 17 percent of tobacco trade in our neighboring country India, 38 percent in Pakistan, 36 percent in Malaysia and the highest 50 percent in Latvia.

Overall, PwC Bangladesh’s proposal to National Board of Revenues (NBR) is full of inconsistencies with reality and completely in line with demands of BATB. PwC BD wants to keep the price of premium and medium tier untouched, tiers where BATB has the monopoly. It should be mentioned that PricewaterhouseCoopers Private Limited (PwC) has a long history of working with British American Tobacco (BAT). PwC worked as an auditor for the tobacco company for 17 years before it was listed in London Stock Exchange in 1998. PwC was also the accountant and advisor when BAT acquired US tobacco company R. J. Reynolds. Although PwC has earned its name as a multinational institution in financial sphere, it should be questioned whether a company with such a history can be considered as a stakeholder in national budget formulation process.