Myth of Cigarette Smuggling
Multinational tobacco companies have long been promoting the myth of cigarette smuggling in the country. In a study, tobacco control researcher Sushanta Sinha showed that various reports and opinion pieces related to cigarette smuggling frequently appear in the media during April and May, just before the national budget is announced.¹ Most of these news reports on smuggling are almost identical in nature. In most cases, there is no information about who is actually behind these smuggling activities. At the same time, it is rarely seen that anyone has been arrested in connection with such incidents. Often, the so-called smuggled cigarettes are simply found lying beside luggage at airports.
Secondly, the question of why smugglers would buy cigarettes from abroad at higher prices and then sell them at lower prices in Bangladesh has never been convincingly answered. In fact, compared to developed countries and even neighboring countries, the price of foreign cigarette brands is much lower in Bangladesh. Therefore, purchasing cigarettes abroad at higher prices and selling them at lower prices in Bangladesh would never be commercially or financially profitable. As a result, there is reason to question the actual purpose behind such claims of cigarette smuggling.
Thirdly, cigarettes do not appear in the list of the top 10 seized items by the National Board of Revenue (NBR).² Yet, news about cigarette smuggling is often presented in a way that suggests the government is losing hundreds of crores of taka in revenue. Press releases from relevant law enforcement agencies regarding seized smuggled cigarettes often report large quantities of cigarettes being confiscated. In reality, although the amount of smuggled cigarettes may be small, the monetary value is shown as very large by adding the 350% import duty to the calculation.
Analysis of Illegal Cigarette’s News
Cigarette Companies Involved in Smuggling
Research has shown that before the national budget is announced, so-called fake cigarette factories are often “discovered” in different parts of the country in villages, fields, and abandoned buildings. During law enforcement operations, these alleged fake cigarette factories typically display broken or old machines, powdered tobacco leaves, and a small quantity of cigarettes. In most cases, apart from a security guard, no one else is found or arrested at these locations. In Bangladesh, more than 95% of the cigarette market is controlled by two multinational tobacco companies.
These companies themselves sell cigarettes at prices higher than the maximum retail price (MRP), thereby evading more than BDT 5,000 crore in taxes every year. Through agents across the country, tobacco companies control retail sellers. As a result, it is extremely difficult to run an illegal cigarette business outside the surveillance of these companies. Rather, the myth of cigarette smuggling is promoted as part of a strategy to discourage the government from banning the sale of single-stick cigarettes and from increasing cigarette prices. At the same time, many of the illegal cigarettes found within the country are, in one way or another, linked to multinational tobacco companies.
Rumors of Smuggling During Tobacco Tax Increases
Every year, tobacco companies also spread propaganda claiming that increasing cigarette prices and taxes will reduce government revenue. However, there is no factual basis for this claim. According to data from the National Board of Revenue (NBR), revenue collected from tobacco products was BDT 2,888 crore in the fiscal year 2004-05. By the fiscal year 2024-25, this revenue had risen to BDT 40,031 crore. In none of the fiscal years during this period did revenue collection decrease. In fact, over the past 18 years, government revenue from tobacco products has increased by nearly eleven and a half times.
Therefore, the myth that higher tobacco taxes lead to increased smuggling has no real evidence. On the contrary, in most cases, tax increases have resulted in higher government revenue.
Revenue Growth by Fiscal Year
BATB’s Illegal Profits from Illicit Trade
Recently, a report published by Campaign for Tobacco-Free Kids (CTFK) presented detailed information about the cigarette smuggling activities of British American Tobacco Bangladesh (BATB) in Bangladesh. In the chapter titled “Cigarette Smuggling in Asia: BAT and Bangladesh”3, the report highlights six issues related to BATB’s involvement in cigarette smuggling in Bangladesh. The points outlining BATB’s involvement in cigarette smuggling in the country are as follows:
Scope and Nature of Smuggling: The operations to bring BAT’s cigarette brands into Bangladesh through smuggling were highly sophisticated and advanced. According to internal company documents, large volumes of BAT cigarettes were smuggled into Bangladesh over many years. Specifically, brands such as Benson & Hedges (B&H) and State Express 555 (SE 555) were smuggled in massive quantities. Furthermore, Bangladesh served as a major regional hub for these illegal flows, even supplying products to neighboring India.
Smuggling as Part of Everyday Operations: Smuggling was so deeply integrated into BAT’s marketing activities in Bangladesh that the company conducted monthly reports to rate the quality of the smuggled cigarettes and the appearance of their packaging. Pricing for these smuggled ‘transit’ brands was controlled from BAT’s central headquarters in England. Additionally, the Singapore-based trading company SUTL acted as the primary middleman for these smuggling operations, managing this business for BAT for several decades.
‘Umbrella Operations’ or Legal Cover: BAT utilized a strategy known as ‘Umbrella Operations’ to mask its smuggling activities in Bangladesh. This involved importing small quantities of cigarettes legally to serve as a cover for much larger volumes being smuggled in at the same time. These legal imports provided a ‘legal cover’ for advertising campaigns that actually supported the sale of smuggled versions, and allowed vendors to appear as legitimate sellers while openly displaying contraband products.
Political Strategy and Tax Evasion: BAT used smuggling as a political tool to persuade the government to reduce cigarette taxes or import duties. In 1994, the company wrote to the Chairman of NBR, claiming that high taxes were causing a decline in legal sales and a loss of government revenue to smuggled contraband. However, the company did not disclose that it was the mastermind behind the smuggling and had direct control over whether legal sales would increase or decrease based on its own supply of contraband.
Smuggling Routes: A large percentage of the smuggled cigarettes were manufactured at BAT’s Southampton factory in England and shipped to Singapore. From Singapore, SUTL arranged for the cigarettes to be shipped along the Strait of Malacca to enter Bangladesh through Chittagong or Cox’s Bazar. Later, to avoid increased customs surveillance at these ports, they developed new land routes via Myanmar.
Involvement of High-Level Officials: Internal documents attest that these smuggling operations were carried out with the knowledge and direct involvement of very senior executives within both BAT and SUTL. This included the Regional Director for Asia-Pacific, the head of the marketing department, and even BAT Chairman-level officials, who supervised ‘transit’ (GT) operations.
The Reality of Cigarette Smuggling
The Tobacco Tax Knowledge Hub of BNTTP has investigated the issue and found that multinational tobacco companies are involved in promoting the myth of cigarette smuggling, while in reality the rate is much lower. A study published in a peer-reviewed journal shows that the share of illegal cigarette trade in the country is only 5.4%.4 However, a local syndicate is engaged in illegal trade through the use of tax-free banderoles. This syndicate is, in one way or another, linked to multinational tobacco companies. Retailers are also responsible for this illegal trade, as some of them violate the law in order to increase sales and thus contribute to the illicit market.
Opposition of the NBR to Licensing
To prevent smuggling, the Ministry of Finance and the National Board of Revenue (NBR) have opposed the licensing of retail sellers. At the same time, they have not taken sufficient initiative to modernize cigarette banderoles. On the other hand, the committee formed by the NBR to prevent smuggling did not include members of the district and upazila taskforce committees established under the The Smoking and use of Tobacco Products (Control) Act, 2005, such as local government licensing officers and sanitary inspectors. Moreover, no initiative has been taken to encourage the government to sign the international Protocol to Eliminate Illicit Trade in Tobacco Products, which could effectively help prevent cigarette smuggling in the country.
Measures to Prevent Smuggling
- All retail sellers must be brought under a licensing system in accordance with local government guidelines. For this purpose, local government authorities should be requested to take the necessary steps.
- Members of the district taskforce committees formed under the Smoking and use of Tobacco Products (Control) Act, 2005 such as local government licensing officers and sanitary inspectors should be included in the NBR committee formed to prevent smuggling.
- Cigarette banderoles and tax stamps should be digitized and modernized. This will ensure proper market monitoring and make it easier to control the illegal cigarette market.
- The Ministry of Health should be urged to take the initiative for the government to sign the WHO Protocol to Eliminate Illicit Trade in Tobacco Products in order to prevent illegal tobacco trade.
Author: Ibrahim Khalil, Public Health Researcher.
References:
- Sushanta sinha, ‘An Investigation of Bangladesh’s Industry-Friendly Cigarette Pricing and Way Forward’. Link: https://bnttp.net/resource/an-investigation-of-bangladeshs-industry-friendly-cigarette-pricing-and-way-forward/
- Sushanta sinha, ‘An Investigation of Bangladesh’s Industry-Friendly Cigarette Pricing and Way Forward’. Link: https://bnttp.net/resource/an-investigation-of-bangladeshs-industry-friendly-cigarette-pricing-and-way-forward/
- https://assets.tobaccofreekids.org/global/pdfs/en/Illegal_profits_to_illicit_profit_en.pdf
- https://tobaccocontrol.bmj.com/content/early/2025/06/04/tc-2024-059131
