NBR to form committees to curb illegal tobacco trade, boost VAT collection

The National Board of Revenue (NBR) has directed all Value Added Tax (VAT) commissionerates to form six-member committees in each circle to enhance its collection from the tobacco sector and curb illegal trade.

In a recent directive issued by the Large Taxpayers' Unit (LTU), the revenue authority emphasised stricter monitoring amid concerns over growing illegal tobacco sales costing the government significant revenue.

Each committee will be led by the respective circle's revenue officer as convener.

Other members will include representatives from tobacco manufacturing companies, police, Border Guard Bangladesh (BGB), Ansar and Village Defence Party (VDP), and an assistant revenue officer who will act as the member secretary.

According to the NBR, approximately 25% of total the VAT comes from cigarettes, bidis, and other tobacco products.

However, illegal trade in domestic and foreign tobacco brands is disrupting overall revenue collection and harming public health.

Recent media reports have highlighted the widespread availability of illegal tobacco products in urban and rural markets, prompting concerns over NBR's reputation and significant revenue losses.

To address this issue, the newly formed committees will conduct daily drives in markets, warehouses, and other suspected locations.

They will also gather information on illicit tobacco trade and take necessary actions.

As per the Value Added Tax and Supplementary Duty Act, 2012, law enforcement agencies will assist VAT officials in executing these operations, according to NBR.

Circle officers will oversee the committees while the LTU will consult VAT commissioners as needed.

Each month, divisional officers will compile reports on the quality and effectiveness of enforcement activities and submit them to the commissioners.

The top-performing officers will receive a 'Certificate of Recognition' from the NBR.

Despite being the highest revenue-generating sector, VAT collection from the cigarette industry has dropped by Tk 771 crore compared to the same period last fiscal year.

The decline follows recent tax hikes, with the government raising the tax on low-tier cigarettes from 74% to 76% in the first half of FY2024-25.

A mid-year increase further pushed the rate to 83%, triggering concerns over a potential collapse of the sector.

Currently, the government loses an estimated Tk 1,500-2,000 crore annually due to illicit cigarette sales.

Industry experts warn that further VAT hikes could severely impact employment, foreign investment, agriculture, and small businesses linked to the tobacco industry.

The sector supports 4.4 million people directly and indirectly, including 1.6 million retailers, over 150,000 farmers, factory workers, and their families.

A sudden rise in taxes could disrupt their livelihoods and drive consumers toward illegal alternatives.