Curbing Illegal Cigarettes Could Yield Tk 200 Billion in Revenue
Graphics: Agamir Somoy
The spread of illegal cigarettes in the country has taken a severe turn. Market analysts and manufacturers say that due to tax evasion in domestic production and marketing, along with smuggled illegal cigarettes, the government is losing around Tk 20,000 crore in revenue every year.
In just the past six months, the illegal cigarette market has grown by 31 percent. From urban neighborhoods to rural areas and local markets across the country, foreign, counterfeit and low-quality tax-evading cigarettes have become widespread. Counterfeit and foreign-branded cigarettes account for the largest share.
At present, nearly 13 percent of the country’s total cigarette market is controlled by illegal products. Around 8.32 crore sticks of illegal cigarettes enter the market every month, which exceeds 1,000 crore sticks annually. As a result, legally operating domestic manufacturers that pay regular VAT are facing an existential crisis.
Recently, during a pre-budget discussion at the National Board of Revenue (NBR), representatives of three leading manufacturers, BATB, JTI and Abul Khair Tobacco, expressed strong concern and frustration over this illegal syndicate. They warned that if illegal cigarettes are not immediately stopped, it will become impossible to sustain legal businesses. They also cautioned that, if the situation remains unchecked, Bangladesh’s cigarette sector could fall under the full control of smuggling syndicates, as has happened in countries such as South Africa, Pakistan, Brazil and Australia.
There is evidence that strict enforcement by the NBR can curb this cycle. Last year, rigorous monitoring and around 13,500 continuous drives across the country significantly reduced the sale of illegal cigarettes. As a result, in July 2025, BATB’s revenue growth stood at 701 percent, JTI’s at nearly 200 percent, and Abul Khair Tobacco’s at about 100 percent.
In the first quarter of FY2025-26, the NBR collected a record Tk 15,836 crore in VAT from the cigarette sector, marking a 61.81 percent increase compared to the previous year. Under the leadership of then Member (VAT Implementation and IT) Belal Hossain Chowdhury, around 2,500 field officials conducted 13,409 successful drives, with the highest 3,621 operations carried out in the Sylhet Commissionerate.
However, after September 2025, these enforcement drives suddenly stopped. Following this, the illegal cigarette syndicate re-entered the market at double speed. In May of the current year, VAT collection from the cigarette sector fell by Tk 1,521 crore compared to the same month last year. After strong growth in the first four months, slower collections in the following months created a shortfall of Tk 422 crore.
In the first 11 months of the current fiscal year up to May, Tk 40,960 crore was collected against a target of Tk 47,789 crore.
Illegal Cigarette Trade Operating Through Three Main Channels
The illegal cigarette business in the country is reportedly being operated mainly through three channels. These include domestically produced cigarettes manufactured in illegal factories using counterfeit or previously used banderols; duty-evaded branded cigarettes smuggled from the Middle East and other countries through airports and border points; and low-quality cigarettes produced by copying popular brands’ packaging in an identical manner.
To capture market share, the syndicates are reportedly luring retailers and shopkeepers with special ‘offers’ such as extra commissions, free products, and cash incentives. A survey indicates that around 82 percent of shopkeepers across the country are receiving a continuous supply of these illegal cigarettes.
The strength of the tobacco sector’s illegal syndicate became evident on October 7 of last year, when VAT Member Belal Hossain Chowdhury, who was leading enforcement operations, was abruptly transferred and made an Officer on Special Duty (OSD) on October 9.
NBR officials said that a case was filed against him based on a false complaint with distorted information. Following this incident, the morale and confidence of field-level officials were significantly affected.
Those working on the sector say that this modern and technology-driven syndicate cannot be curbed through traditional or manual methods. To protect the economy and public health, they have proposed seven modern reforms. These include digital monitoring of every stage from production to sales, mandatory QR codes on every cigarette pack, detection of counterfeit banderols through digital monitoring systems, formation of a coordinated task force involving the NBR, customs and police, introduction of AI-based risk analysis systems, rational reform of the tax structure to prevent low-income smokers from shifting toward cheaper illegal cigarettes, and ensuring legal and administrative protection for honest officials involved in enforcement operations.
According to economists and health experts, illegal cigarettes are not only causing massive revenue losses but also pose a serious public health threat due to the use of unregulated and harmful chemical ingredients.
