NBR Cracks Down on Tax Evasion with QR Codes on Cigarette Packs

The National Board of Revenue (NBR) is set to implement a new strategy to combat tax evasion in the tobacco industry by introducing mandatory Quick Response (QR) or Augmented Reality (AR) codes on cigarette packets. This move aims to enhance transparency and prevent revenue leakage from the illegal cigarette market.

• Mandatory QR/AR codes on cigarette packs to verify tax compliance.
• Rewards for individuals reporting tax evasion.
• Strengthening of existing tax stamps with improved security features.
• No immediate increase in the overall 83% tax rate, but potential price adjustments.
• Consideration of a shift from percentage-based to specific tax systems.

NBR Chairman Abdur Rahman Khan announced the initiative during a pre-budget meeting with tobacco industry stakeholders. The new QR/AR codes will allow consumers to instantly verify if the correct taxes have been paid on a specific cigarette pack. This technology-driven approach is part of a broader effort to modernize the tax system and improve compliance.

In addition to the QR codes, the NBR plans to strengthen the existing tax stamp system on cigarette packets. This includes improving the colours, adhesive technology, and security features of the stamps to prevent tampering and counterfeiting. The NBR emphasized that strict punishments will be meted out to those involved in the marketing of illegal cigarettes, ensuring that every pack leaving a factory is equipped with the specific verification code.

To further incentivize compliance and detection of tax evasion, the NBR will introduce a whistleblower mechanism. Individuals who provide evidence of tax evasion through the new system will be eligible for substantial rewards. This initiative aims to empower consumers and the public to actively participate in curbing illegal activities within the tobacco sector.

While the NBR has indicated that the current combined tax rate of 83% on cigarettes will not be increased in the upcoming fiscal year’s budget, there is a possibility of price adjustments. Chairman Khan suggested that cigarette prices might be revised to align with regional benchmarks, as cigarettes are currently sold at lower prices in Bangladesh compared to other South Asian countries. The NBR’s policy wing has been directed to work with manufacturers to determine the specifics of any price adjustments.

During the meeting, tobacco manufacturers proposed a shift from the current percentage-based tax system on retail prices to a "specific tax" system, where a fixed amount is levied per cigarette stick. They argued that the current ad valorem system disproportionately increases the tax burden with price hikes, pushing consumers towards illicit products. The industry also highlighted that revenue growth has slowed due to sharp tax and price increases, with an estimated 22% of total cigarette volume shifting to illegal channels, resulting in significant annual revenue loss.

• Cigarette packs to get QR codes to curb tax evasion, bdnews24.com.
• NBR to introduce QR codes on cigarette packs, Newagebd.net.