The country faces a persistently low tax-to-GDP ratio, one of the lowest in South Asia, leaving the government under-resourced for social investment. On the other hand, a rising tide of non-communicable diseases (NCDs) is quietly bleeding households dry, pushing an estimated six million people into poverty each year through catastrophic health expenditures alone. Out-of-pocket health spending now accounts for nearly 74 to 79 percent of total health costs, meaning that for every hundred taka a Bangladeshi spends on getting better, nearly eighty comes from their own pocket. These two crises are not unrelated. And the solution to both may lie in a single, evidence-backed reform that much of the world has already embraced: a meaningful overhaul of health taxes, popularly known as ‘sin taxes’ on tobacco, sugar-sweetened beverages and other harmful products.
The term ‘sin tax’ may carry a moral undertone, but the World Bank has rebranded these levies as ‘health taxes,’ a name that better captures their dual purpose: generating government revenue while simultaneously discouraging consumption of products that harm individuals and burden the healthcare system. Bangladesh already imposes such taxes in theory. The problem is that in practice, they are remarkably low.
In Sri Lanka, a cigarette costs sixty Bangladeshi taka. In Bangladesh, that same stick sells for roughly fifteen taka. Meanwhile, a banana in Sri Lanka costs about three taka. This means that in Sri Lanka, a cigarette costs twenty times more than a piece of fruit. In Bangladesh, they are nearly the same price. When a deadly product is priced at parity with a nutritious one, something has gone deeply wrong with our tax policy. A WHO price index of a 20-cigarette pack – normalising Bangladesh’s price to 100 – shows that Sri Lanka’s equivalent pack costs 1,033 units on that scale, i.e. on average, ten times. Maldives sits at 421, Bhutan at 357, Nepal at 308, India at 280, and Thailand at 201. Bangladesh, at 100, is the cheapest place in the region to smoke. This is not a badge of honour. It is an advertisement for addiction.
A simulation exercise conducted by the Institute of Health Economics (IHE) at the University of Dhaka, in collaboration with WHO, Johns Hopkins University, and partner organisations, offers a concrete policy option: merge the existing low and medium cigarette price tiers, set a minimum pack price of 100 taka for a pack of ten sticks, and add a specific tax of four taka per stick. The projected outcome? Total tobacco tax revenue rises to approximately 85,000 crore taka – up from the current roughly 40,000 crore – generating nearly 45,000 crore in additional annual revenue.
This is not a marginal improvement. It is a near-doubling of tobacco tax receipts from a single, administratively straightforward reform. This money does not have to disappear into the general budget. It can and should be earmarked for universal health coverage and NCD prevention, transforming a tax on harm into direct financing for healing.
Sceptics may question whether such reforms actually work. The Philippines offers a definitive answer. In 2012, President Benigno Aquino III – himself a chain smoker, as the story goes – pushed through a landmark sin tax reform, dramatically increasing levies on tobacco and alcohol by more than 100 percent, and subsequently adding taxes on sugar-sweetened beverages. The result was extraordinary: tobacco and alcohol tax revenue surged from PHP72 billion to PHP269 billion, a more than 270 percent increase. Over 80 percent of this additional revenue was channelled directly into universal health coverage. Universal health insurance enrolment jumped from 52 percent in 2012 to 95 percent in less than a decade. Smoking prevalence fell significantly. Mexico saw similar gains after increasing its sugary drink tax, recording declines in sugar-sweetened beverage purchases in consecutive years. Thailand funds its public health promotion foundation, ThaiHealth, through a two percent surcharge on tobacco and alcohol taxes – an elegant mechanism that converts vice into virtue at scale.
The most common objection raised against higher tobacco taxes in Bangladesh is the fear of fuelling illicit trade. It is a legitimate concern – but the evidence does not support it as a reason for inaction. It is, at its core, an enforcement problem, not a tax problem.
While a pilot study using the ‘littered pack’ methodology in Dhaka found that around 95 percent of discarded cigarette packs complied with tax and labelling requirements – with the small share of potentially illicit packs concentrated mainly in the premium and high-price tier – the stronger evidence comes from a separate peer-reviewed study based on Global Adult Tobacco Survey (GATS) data. That study found no evidence of a significant rise in illicit cigarette consumption despite a 14-percentage-point increase in tobacco taxes between 2009 and 2017. Importantly, the low- and medium-tier segments that dominate Bangladesh’s cigarette market remained overwhelmingly legitimate. Similar experiences have also been observed in countries such as the Philippines and Sri Lanka, where substantial tobacco tax reforms did not lead to any meaningful expansion of illicit trade.
Enforcement mechanisms can further close this gap. The National Board of Revenue is already exploring QR code-enabled tax stamps on cigarette packs. Combining this with production-level monitoring would give authorities a robust tool to detect and deter evasion, making the illicit trade argument increasingly moot.
There is another dimension to this issue that rarely receives attention. In the low-price segment, cigarette sticks with a declared price of 8.6 taka are often sold for 10 taka. That 1.4 taka gap, on a product subject to an 83 percent tax burden, generates no additional revenue for the government. If the minimum retail price were aligned with the actual market price and effectively enforced, the full amount of tax due would accrue to the exchequer. This disconnect between declared prices and real retail prices is not just a market distortion; it represents a structural leakage in the tax system that pricing reform could help eliminate.
Sin tax reform is not just technically sound; it is politically coherent. The alignment with the BNP manifesto’s commitments – raising the tax-to-GDP ratio to 15 percent by 2035, strengthening healthcare, investing in youth, and expanding social protection – is not incidental. It is direct. Higher health taxes generate sustainable domestic revenue, finance universal health coverage, reduce youth smoking and unhealthy consumption, and can fund welfare programs for vulnerable populations. They also advance digital governance when implemented through smart tax stamps and platform-based levies. Moreover, these digital platforms can be taxed for selling other junk foods.
The sin tax reform in Bangladesh rests on three reinforcing pillars: it raises desperately needed revenue, it reduces the health burden that drives millions into poverty, and it directs resources toward the social development investments the country urgently needs. This is what economists call a ‘triple win’ and it is rare in public policy.
The arithmetic, as has been noted, is already done. What remains is the political will to act. Bangladesh cannot afford to keep its deadly products cheap and its healthcare system underfunded. The reform window is open. It should not be left closed.
The views expressed in this article are solely those of the author
The author is a Professor and Director at the Institute of Health Economics, University of Dhaka. He may be reached at [email protected]
