Tobacco is not merely a consumer product. It is a major driver of preventable death, disease, poverty and public expenditure. Bangladesh is one of the largest tobacco-consuming countries in South Asia. About 35.3 percent of adults use tobacco, equivalent to nearly 37.8 million people.
Tobacco use among students aged 13-15 years is also significant, at 9.2 percent. Tobacco-attributable diseases kill around 200,000 people every year and disable many more.
Although the tobacco sector generated about Tk.40,000 crore in revenue in FY2024-25, the estimated health, mortality and environmental costs of tobacco use reached about Tk.87,000 crore. This indicates that tobacco creates a large net social and economic loss.
Tobacco use leads to cancer, cardiovascular disease, stroke, chronic respiratory disease, oral disease and premature death.
The burden is not limited to hospitals and patients. When a wage earner becomes ill or dies early, households lose income, children’s education suffers and families may fall into debt. Poor households are affected most severely because tobacco spending competes directly with food, nutrition, housing and education.
Bangladesh also faces a large burden from smokeless tobacco, including jarda, gul and dry tobacco leaf (sada pata). Many smokeless tobacco users are poor and female, yet smokeless tobacco contributes only about 0.15 percent of total tobacco revenue.
This means that the present tax structure fails twice: it does not adequately discourage use among vulnerable groups, and it does not collect appropriate revenue from harmful products.
Why tax and price measures are important
Tax and price measures are among the most effective ways to reduce tobacco use. WHO Framework Convention on Tobacco Control (FCTC) Article 6 recognises that raising tobacco taxes and prices reduces demand, especially among young people and lower-income users.
The Article 6 guidelines also note that higher taxes generally increase government revenue while reducing consumption.
Bangladesh’s current system is too complex to fully deliver these benefits. Cigarettes are divided into four price tiers: low, medium, high and premium. When taxes or prices rise in one tier, smokers can move to a cheaper tier rather than quitting.
This weakens the public health impact of tax increases. The market share of low-tier cigarettes increased from 25 percent in 2006-07 to 76 percent in 2023-24. This reflects a structural weakness in the tax system and a market strategy that keeps cheap cigarettes widely available.
The problem of affordability is also serious. Between 2021 and 2023, prices of essential goods increased by 27 to 89 percent, while cigarette prices rose by only 6 to 15 percent across different tiers. As a result, cigarettes became cheaper in real terms compared with food and daily necessities.
This is dangerous for youth and low-income users, who are more likely to continue or initiate use when tobacco remains affordable.
Benefits of specific tax and increasing price
Bangladesh should introduce a specific tax component in addition to the existing ad valorem supplementary duty. Under an ad valorem system, tax is charged as a percentage of price. This system is vulnerable when declared prices remain low or when companies retain a large part of price increases as profit.
A specific tax, imposed per stick, pack or weight, is easier to administer and more effective in raising the minimum price of cheap tobacco products.
The budget 2026-27 should consider imposing Tk.4 as a specific supplementary duty on every 10-stick cigarette pack while maintaining the existing 67 percent supplementary duty. It also should raise prices in line with inflation and income growth.
The upcoming budget should adopt a stronger reform by reducing cigarette tiers from four to two. The first tier should be a “standard tier,” combining low, medium and high tiers, with a minimum retail price of Tk 150 per 10 sticks.
The second should be a “premium tier,” with a minimum retail price of Tk 200 or above per 10 sticks. Both tiers should include the existing ad valorem duty plus a specific tax. This approach would narrow price gaps, reduce down-trading, increase revenue and support quitting.
Tax reform should also cover bidi and smokeless tobacco. Bidi should have a uniform price and tax rate, regardless of filter status. Jarda, gul and other smokeless tobacco products should be taxed on a specific, weight-based basis.
Without these reforms, users may remain in cheap and poorly regulated tobacco markets, and the government will continue to lose revenue.
Why the government should exit tobacco business
The Government of Bangladesh should not hold shares in tobacco companies or participate in their boards. British American Tobacco (BAT) Bangladesh’s own shareholding page shows that, as of 30 April 2026, the “Govt.” category held 9.21 percent of shares.
Its investor information also lists state-linked holdings through Investment Corporation of Bangladesh, Sadharan Bima Corporation, Bangladesh Development Bank Limited and direct government holdings.
This creates a conflict of interest. The government is responsible for reducing tobacco use, protecting public health and implementing the WHO FCTC. At the same time, shareholding in a tobacco company gives the state a financial interest in tobacco sales and profits.
Board representation deepens this conflict. BAT Bangladesh’s director profile states that one non-executive director is serving as additional secretary at the Finance Division, while another is managing director of ICB, a state-owned investment institution.
WHO FCTC Article 5.3 requires parties to protect public health policies from the commercial and vested interests of the tobacco industry.
Therefore, the government should gradually divest its shares in BAT Bangladesh, withdraw public-sector nominees from the board, and prohibit future investment by state-owned entities, public funds and pension funds in tobacco companies. This would strengthen policy integrity and protect tax policy from industry influence.
Policy recommendations for Budget 2026–27
The upcoming budget is the new government’s first budget, which needs to reflect a strong commitment to discourage tobacco use and increase revenue though tax and price measures. In doing so, the following recommendations are suggested.
First, reduce cigarette tiers from four to two: standard and premium. Second, merge low, medium and high tiers into one standard tier with a minimum retail price of Tk 150 per 10 sticks, and set the premium tier at Tk 200 or above.
Third, impose a specific tax of at least Tk 4 per 10-stick pack in addition to the existing ad valorem supplementary duty. Fourth, index tobacco taxes and minimum prices annually to inflation and per capita income growth. Fifth, apply specific, weight-based taxes to bidi, jarda, gul and other smokeless tobacco products.
Sixth, strengthen tax administration through digital monitoring, secure tax stamps and strict enforcement of declared retail prices. Seventh, earmark part of the additional revenue for NCD treatment, cessation services, health insurance and support for poor patients.
Finally, divest government shares in BAT Bangladesh and remove government-linked representatives from the company’s board.
Progga’s estimates reveal that the proposed reforms could encourage about 500,000 adult smokers to quit, prevent more than 372,000 young people from starting smoking, reduce tobacco use by about 0.5 percentage points and generate more than Tk.44,000 crore in additional revenue.
These benefits are non-trivial, which should be positively considered to address tobacco-related critical public health concerns and enhancing the government’s financial health to invest in developmental priorities envisioned in its election manifesto.
The writer is the Research Director, Bangladesh Institute of International and Strategic Studies
