Illegal cigarettes now account for over 18 per cent of Bangladesh’s cigarette market, raising concerns over revenue losses and growing pressure on legitimate manufacturers, according to the Bangladesh Cigarette Manufacturers’ Association (BCMA).
Despite steady growth in government revenue from the tobacco sector, the BCMA estimates that illicit cigarette products currently control more than 18 per cent of the market.
Industry insiders say that the rapid expansion of untaxed, counterfeit, and smuggled cigarettes is shrinking the legal market and creating long-term risks for government revenue collection.
To tackle the problem, the National Board of Revenue (NBR) is planning to introduce QR codes on cigarette packs as part of a digital tax verification system.
Citing Morocco as an example, an NBR official said the country’s illicit cigarette market had grown to around 15 per cent before 2010.
However, after the introduction of QR code-based tracking systems, the share of illegal cigarettes gradually declined to below 2 per cent.
The NBR believes the initiative could help generate an additional Tk10,000 crore to Tk12,000 crore in annual revenue from the sector.
NBR Member for VAT policy Md Azizur Rahman said that strong measures will be taken in the upcoming national budget to prevent illegal trade in the sector.
However, industry leaders warned that sudden or excessive tax hikes without proper market analysis could further strengthen the illicit cigarette trade.
They emphasized that tobacco tax policies should be balanced, predictable, and data-driven to ensure revenue growth while maintaining market stability and controlling illegal trade.
They also stressed the need for stricter monitoring against untaxed and counterfeit cigarettes, stronger border surveillance, digital tax verification, and coordinated action between regulators and legitimate manufacturers.
According to officials of cigarette manufacturing companies, the legal cigarette market is shrinking rapidly as consumers increasingly shift to untaxed and illegal products due to rising prices.
NBR data show government revenue from the cigarette sector increased by nearly 50 per cent over the last five fiscal years. Revenue collection from the sector stood at Tk29,996 crore in FY2021-22 and is projected to rise to Tk44,966 crore in FY2025-26.
However, revenue growth has slowed consistently over the same period. Growth declined from 14 per cent in FY2022-23 to just 5 per cent in FY2024-25.
The sharpest concern emerged in cigarette sales volumes.
According to NBR, total cigarette sales in Bangladesh stood at 84.33 billion sticks in FY2023-24. The following fiscal year, sales dropped to 65.63 billion sticks.
This means nearly 18.7 billion sticks disappeared from the formal market within a year, marking a decline of around 22 per cent.
BCMA leaders said the situation worsened after a sudden increase in cigarette taxes in the interim budget announced in January 2025. They argued that the rapid rise in prices of legal cigarettes pushed many price-sensitive consumers toward cheaper illicit products.
Sheikh Shabab Ahmed, Group Head of Corporate Affairs and Legal at Abul Khair Group, told TIMES of Bangladesh that the illicit market has become the second-largest operator in the market after the 2025 interim policy interventions.
“Now we need to sustain the current market by introducing price increase breaks in the low segment in the coming budget and bring back the volume that went outside the tax net. We could potentially gain as much as Tk8,000 crore from the illicit segment,” he said.
Several sector officials said that alongside declining legal production and sales, the illegal market has expanded rapidly through cross-border smuggling, counterfeit banderols, and tax-evaded production.
They warned that if a large share of the market moves outside the tax net, the government may gain some short-term revenue through higher tax rates, but could face significant long-term losses as the legal tax base weakens.
