Switching to a specific excise tax on tobacco could generate more than Tk22,000 crore in additional government revenue over the next decade while also reducing cigarette consumption, according to research presented by Policy Exchange.
The findings were shared with senior officials of the National Board of Revenue (NBR) as part of a stakeholder engagement aimed at supporting evidence-based tobacco tax policy.
Policy Exchange recently published a research report analysing Bangladesh’s tobacco tax structure and assessing how alternative excise systems could affect government revenue, cigarette consumption and market dynamics over the next decade.
The study uses household survey data, historical tax records and internationally recognised modelling frameworks to simulate the performance of different tax systems.
The analysis compares the current ad valorem tax structure with potential mixed and specific excise systems to evaluate their long-term fiscal and public health implications.
The report finds that Bangladesh’s existing multi-tier ad valorem system may be approaching its structural revenue limits and could offer less flexibility in determining tax rates.
According to the findings, structural adjustments to the current system could improve the stability and predictability of tobacco tax revenue while reinforcing health objectives.
The study estimates that shifting from the ad valorem system to a specific tax regime could generate more than Tk22,000 crore in additional revenue over the next ten years beyond normal growth.
Tobacco remains a major source of government revenue in Bangladesh. In the last fiscal year, the sector generated about Tk40,000 crore in tax revenue, accounting for nearly 9 per cent of the National Board of Revenue’s total collections.
Policy Exchange Chairman Dr Masrur Reaz said strengthening the evidence base around tobacco taxation is essential for designing effective fiscal policy.
“Tobacco taxation remains one of the most important sources of government revenue in Bangladesh. Strengthening the evidence base around how different tax structures affect revenue stability, consumption patterns and market behaviour is essential,” he said.
“Our research suggests that adopting a specific tax system could not only boost revenue but also reduce tobacco consumption by an additional 8 per cent over the same period,” he added.
Policy Exchange said it will continue engaging with government and private sector stakeholders and work with the NBR to refine the simulation model using updated administrative data and technical inputs.
The initiative aims to strengthen the analytical foundation for future tobacco tax policy and support broader efforts to improve tax efficiency, enhance revenue mobilisation and align fiscal measures with public health objectives.
