International Resource Center

Report: India Should Increase Tax Rates on Bidis

A new report by Dr. Emil M. Sunley, one of the world’s leading experts on tobacco taxation, concludes that bidis are under taxed compared to cigarettes, despite being at least as harmful. The report recommends that India should increase excise taxes on bidis to protect health.

Tobacco kills five million people a year worldwide, more than any other single agent, and India is the world’s second-largest consumer of tobacco. In India, bidis account for the great majority of smoked tobacco.

“Bidis are under-taxed compared to cigarettes, taking into account the health risk of each, and therefore, on health grounds, a strong case can be made for increasing the excise burden on bidis,” the report concludes.

Dr. M. Govinda Rao, director of the National Institute of Public Finance and a member of the Economic Advisory Council to the Prime Minister of India, states the report “makes out a clear case for enhancing the excise rates on bidis.”

Dr. Rao also states that “the argument that bidi is consumed by poor people and therefore, should be taxes at lower rates on equity grounds does not hold water for health is as important if not more for the poor as it is for the rich.”

India: The Tax Treatment of Bidis (400 KB, PDF), is one of a series of reports on tobacco taxation funded by the Bloomberg Philanthropies as part of the Bloomberg Initiative to Reduce Tobacco Use.