Australia’s Tobacco tax and regulatory missteps hold warnings for Bangladesh
Staff Reporter
Bangladesh’s Interim Government risks forfeiting substantial government revenueand instead triggering acceleration of the illicit tobacco market if it proceeds with its proposed draconian tobacco control measures. Plans to ban ingredients, mandate retailer licenses, and alternative smokeless nicotine products such as vapour and nicotine pouches, coupled withdrastic excise increases above WHO target rates as seen in January 2025, do not necessarily translate into a reduction in tobacco consumption as seen in other countries, but instead threaten to fuelillicit trade for cigarettes.
Tobacco taxes currently contribute roughly 10% of Bangladesh’s entire government revenue, making the tobacco sector one of the biggest fiscal contributors of the country.With financial pressures intensifying and enforcement resources stretched thin, the government has little room for error.
Bangladesh’s currenttobacco tax rate stands at 83% of the retail price for the whole market, which exceeds the World Health Organization’s recommended benchmark of 75%. While the tobacco sector in Bangladesh had traditionally delivered an annual government revenue growth of 12-15% in the past, excluding the year impacted by Covid, early signs [afterthe unexpected excise hike was implemented]showed thatthis year’s tobacco revenue has witnessed a growth of mere 5%.
Australia’s recent experience highlights how quickly tough tobacco regulations can disrupt the industry, driving rapid changes in both market dynamics and consumer behavior.
Over the past decade, Australia has paired some of the world’s highest excise taxes—now at AUD 1.5 per cigarette—with strict controls such as flavor bans and a de facto ban on retail vapor sales. These aggressive measures have produced striking and far-reaching consequences for the industry, with results that have been truly alarming.
Revenue collapsed. Tobacco excise revenue peaked at AUD 16.3 billion in 2019–20, before falling to AUD 7.8 billion in 2024-25, a loss of nearly AUD 9 billion. Independent economist Chris Richardson estimates the true annual loss may be closer to AUD 10 billion, arguing the scale of decline far exceeds what could plausibly be explained by quitting alone.
Illicit markets surged. Official data from the Australian Illicit Tobacco and E-cigarette Commissioner estimates that 50–60% of all tobacco consumption is now illicit. In vapour, 95% of the total market is illicit and operates outside regulatory and health controls. Criminal networks are estimated to earn AUD 5.7–8.5 billion a year from illicit tobacco and vapes combined, while evaded excise and customs duty range from AUD 7.7–11.8 billion annually.
Public health gains proved uneven. After Australia banned non-therapeutic vapes in July 2024, overall nicotine use rose for the first time in years . Survey data show the increase was driven mainly by factory-made cigarettes, primarily driven by increased smoking rateamong 18–24-year-olds.
Australia is a G20 and OECD country with strong regulatory institutions and, as an island, has robust border controls. Yet even there, authorities have struggled to regain control of the tobacco and vapourmarket. For Bangladesh, the risks are magnified. We cannot afford to misstep with poorly thought-outregulations which will only drive an already growing illicit market and reduce government revenue.
The former Head of the Australian Border Force’s Illicit Tobacco Strike Team, Rohan Pike who also led Australia’s law enforcement efforts in Pakistan and 12 neighbouring countries for 3 years stated“Australian tobacco control policies should serve as a cautionary tale for Bangladesh and other countries considering tobacco tax rises and additional regulation. Excessive excise hikes have reduced government revenue to less than half in just 6 years and driven an exploding black market that now makes up about two-thirds of the tobacco market. Bans on flavoured cigarettes have only accelerated the shift over to the black market and virtual bans on vapes and other nicotine products have made the far more dangerous, cheap, illegal cigarettes increasingly popular, reversing decades of smoking rate reductions. The Bangladesh government cannot afford to make the same mistakes as Australia.”
A leading Bangladeshi expert in public finance has cautioned that adopting similar policies could lead to severe and unintended consequences.
“Bangladesh relies more heavily on tobacco revenue than Australia, but has far fewer enforcement tools,” said Farid Uddin, former NBR Member. “If regulation moves faster than capacity and becomes impossible to implement and enforce, the state risks losing revenue, credibility, and control of the market at the same time. Hence, regulations have to be realistic and time bound.
Critics contend that the bill should be reconsidered and brought before Parliament after the February 2026 election, ensuring that elected representatives can thoughtfully balance public health objectives with fiscal stability and enforcement realities. Australia’s experience demonstrates that, without proportionate enforcement, aggressive tobacco controls may inadvertently weaken the state rather than strengthen it.
