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Tax on tobacco leaf export raises debate

Star Business Report
The 10 percent duty proposed on the export of tobacco leaves in the budget for 2010-11 has cast a shadow over the relatively new export item with exporters saying the proposal, if implemented, will hurt global competitiveness.
Around 300,000 farmers grow tobacco in Rangpur, Kushtia and Chittagong will also be affected by the budgetary move to slap duty on the export of the country's top cash crop. Industry people said if the decision is implemented, Bangladesh will be the first country to impose duty on tobacco leaves export.
“The duty will hurt the competitiveness of the Bangladeshi produce in the international market, as no country in the world imposes duty on the product," said Zakir Ibne Hai, head of corporate and regulatory affairs of
Dhaka Tobacco of Akij Group, Abul Khair Tobacco, Nasir Tobacco and Global Tobacco, through their registered farmers.
Virginia type tobacco leaves that are cured or dried through fire are mainly grown in Kushtia and Chittagong, which meets local demand.
In 2010, around 85,000 hectares of land across Bangladesh came under tobacco cultivation, accounting for less than 1 percent of total cultivable land, sector leaders said. Tobacco plants remain in the field for 90 days - from mid-October to earlyjanuary.
Currently, Brazil, India, China and the US are the world's leading tobacco exporting countries with their global share of trade being around 26 percent, 17 percent, 16 percent and 7 percent. Bangladesh's share in
British American Tobacco Bangladesh.
"When Bangladesh is looking for export diversification, the proposed export duty will definitely be considered as regressive. It will also negatively impact the livelihood of thousands of farmers."
In budget reactions, some economists said the economic rationale for proposing a tax on the export of tobacco is unclear.
Farmers in the monga or near famine-prone Rangpur region that grows most tobacco meant for export are unhappy with the levy proposition for the cash crop.
Growers in the Rangpur region have
been cultivating tobacco for the last 250 years. But they started growing export-oriented burley variety tobacco only since 1998. Burley type tobacco leaves grown in Rangpur and Manikganj regions, which are cured or processed naturally through air, have little or no demand in the local market.
Bangladesh exported tobacco leaves worth $55.2 million in 2009, while in 2008, the country shipped tobacco valued at $35.2 million. Tobacco exports started in 2004.
Germany, Belgium, Hungary, Sweden, Indonesia, Malaysia, Pakistan and Singapore are the main importers of Bangladeshi tobacco leaves that are mostly produced by BAT Bangladesh,
world tobacco trade is only 1.8 percent.
More than 70 percent of Bangladesh's export is composed of garments, followed by frozen shrimps, jute goods, leather, and raw jute.
Referring to the proposal for export duty on tobacco in Bangladesh, industry insiders said in neighbouring India, the government promotes the crop in the international market.
According to Indian Tobacco Board's website, it promotes overseas marketing of Indian tobacco.
Tobacco leaf exporting companies said the duty on exports would increase prices, driving away international buyers.