In the next budget for FY25, the National Board of Revenue (NBR) is considering raising taxes on food and beverage goods that have added sugar. Experts support this decision as a correct step in the direction of enhancing public health.
A senior NBR official who is actively involved in policy-making told TBS, on condition of anonymity, that manufacturers of carbonated beverages currently have to pay a minimum 3% tax on turnover, with the possibility of an increase to 5% in the upcoming fiscal year.
For foods high in sugar, a substantially larger increase is anticipated. According to the official, the minimum tax rate on cakes, biscuits, chocolates, jams and jellies, juices, and ice cream may increase from the current 0.6% to 5%.
He also made hints about possible rises in additional responsibilities for some sugar-filled goods.
“On Tuesday [14 May], we will sit with the prime minister to finalise our proposal,” he stated.
Health experts support the measure, despite business insiders who oppose it, arguing that price hikes from the tax hike will ultimately lower the use of sugary foods and lower health risks.
“It would be a good move if the government increased taxes to limit the consumption of sugar-sweetened beverages, as these items are harmful to health,” public health specialist Professor Benazir Ahmed stated to TBS.
“Sugar and salt are essentially white poisons, so we should discourage their consumption by any means,” he stated.
“Metabolic diseases and hyperlipidemia, or elevated cholesterol, are primarily caused by sugar-induced foods and can have detrimental consequences on the skin and brain. Benazir clarified, “These products directly raise blood sugar levels in the body, and insulin is unable to control them. The government ought to encourage the availability of natural fruits, which are good for people’s health.
A study titled “Underweight, overweight or obesity, diabetes, and hypertension in Bangladesh, 2004 to 2018,” which was released on September 30, 2022, claims that sedentary lifestyles and dietary changes are to blame for the country’s rising obesity prevalence, which has nearly tripled among women and increased by 1.5 times among men over the previous 14 years.
The survey also discovered that, both in men and women, the prevalence of diabetes has been rising, going from 11% to 14%.
Professor Dr. Rumana Huque, an expert in public health economics, stated, “Leaving taxes on beverages with added sugar to the NBR would be a good move. In addition to generating cash, this approach would also benefit public health.”
The government raised the minimum tax on producers of carbonated beverages from 0.6% to 5% in the FY24 budget.
But after intense lobbying by a number of interested parties, the government finally lowered it to 3%.
Meanwhile, the present minimum tax rate of 0.6% is still in place for other sweet goods like juice, ice cream, chocolate, cake, biscuits, jam, and jelly.
The NBR representative stated, “We now intend to raise the minimum tax to 5% for all manufacturers of sugary items.”
“We see very little revenue growth in this industry, and possibly even a decline. Our primary goal is to decrease the use of sugary products while taking health issues into consideration, not to boost revenue from this industry,” the official stated.
The government received Tk1,482 crore in revenue from this industry in FY23. But sales fell after the FY24 tax rise, which resulted in a 30% drop in revenue from July to March of the current fiscal year.
Companies object to the idea
According to industry experts, a large tax hike might have a detrimental effect on the industry and possibly lead to less investments.
The head of the Bangladesh Beverage Manufacturers Association, SM Jahangir Hossain, stated to TBS that “if taxes go up, prices will definitely go up as well, which may reduce consumption.” To find out the changes the administration is proposing, we will have to wait for the budget release.”
The president of the nation’s top trade organization, the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), Md. Mahbubul Alam, wrote a letter to NBR Chairman Abu Hena Md. Rahmatul Muneem on May 9th requesting a decrease in the current tax rates.
The FBCCI president pleaded with the NBR to establish a long-term tax structure for the industry in order to encourage both foreign and domestic investment.
The Beverage Manufacturers Association reports that with a Compound Annual Growth Rate of 20%, investments in Bangladesh’s carbonated beverage industry total about Tk10,000 crore.
Can tax increases be the only way to reduce consumption?
The Bangladesh Beverage Manufacturers Association states that the overall tax incidence on carbonated beverages today surpasses 48% when factoring in value-added tax, import taxes, and other taxes.
Business Initiative Leading Development (BUILD) reports that the tax rates on beverage items are as follows: 30% in Bhutan, 29% in Sri Lanka, 39% in Nepal, and 40% in India.
Although experts applauded the proposed tax hike, they stated that tax increases alone would not achieve the goal of decreasing beverage consumption.
Professor Benazir Ahmed, a former director of the Directorate General of Health Services (DGHS), stated: “The health department should spearhead a significant public awareness campaign to reduce the consumption of sugar-sweetened beverages, particularly among children.” To encourage wholesome eating practices, the government must make large investments.”
“We have seen that tax hikes alone cannot control the consumption of harmful items,” he remarked, referring to tobacco products. Additionally, we must support regional fruit growers.”
Dr. Rumana Huque stated, “While tax is a cost-effective tool, there is a need for mass campaigns, awareness-raising efforts, and policies on advertisement control and packaging.”
International methods for levying taxes on sweets
Various nations across the world have employed diverse approaches to curb the intake of sugar-filled goods by means of levies.
Developed countries like France and the United Kingdom are spearheading the initiative, introducing targeted tariffs based on beverage sugar levels.
UAE taxes goods that have added sugar by 50%. Asia’s emerging economies are adopting similar strategies in response to growing health issues.