Factors Inhibiting Payment of Taxes of Smokeless Tobacco Manufacturers Operating Outside the Tax Net in Bangladesh

Smokeless tobacco (SLT) use in Bangladesh is high, yet it is generally held that SLT manufacturing often occurs outside the tax net. This study examines SLT production, pricing and turnover for a sample of 88 SLT manufacturers operating outside the tax net and identifies factors perceived to contribute to non-payment of taxes by SLT manufacturers.

SLT taxation is governed by the Value Added Tax and Supplementary Duty Act, 2012. The government introduced maximum retail price (MRP) as the tax base for SLT products replacing tariff value in FY 2019-2020. The tax structure of SLT products is characterized by low tax base and ad valorem tax system.

Low SLT revenue share in total tobacco tax revenue: The total revenue collected from the 218 SLT manufacturers who paid all taxes due from FY 2015-16 to FY 2019-20 is Tk. 165.75 crore. As a percentage of total tobacco tax revenue, SLT revenue is very low, from 0.11% to 0.17% from FY 2015-16 to FY 2019-20.

Full report pdf  (11 April, 2021)

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