The Economics of Tobacco Taxation in Bangladesh

With an objective to recommend an effective tobacco tax policy for Bangladesh, the study details the present structure of tobacco taxes in the country; estimates own- and cross-price elasticities of demand for tobacco products; and simulates the impact that cigarette tax increases could have on government revenue and public health. To examine the tobacco tax structure, the team used secondary data from the National Board of Revenue (NBR) and other relevant data. Then in order to analyze the data, the team applied the Deaton model, which exploits price variation across geographical space in household survey data to estimate price elasticities. The research used the Household Income and Expenditure Surveys from 2010 and 2016, conducted by the Bangladesh Bureau of Statistics, to estimate price elasticities. Lastly, the team used estimates of own-price elasticity of demand in the present study to simulate various revenue and health outcomes of policy interventions. The results of the study show that the overall consumption of smoking tobacco products does respond significantly to price changes. And the report recommends that the government should replace the existing ad valorem taxes with specific taxes by amending the existing law.

Authors: Ahmed, Nasiruddin; Hossain, Jahangir; Huque, Rumana; Hassan, Md Tariq; Mozumder, Tanvir Ahmed
Type: Report
Year: 2019