Economic cost of smoking estimated at Rs143bn in 2012: Activists, health experts urge govt to increase FED on tobacco items

ISLAMABAD: Tobacco control activists and health experts, Monday strongly proposed the government to increase the incidence of federal excise duty (FED) on tobacco items including smokeless tobacco products in Pakistan.

This was the crux of the one-day seminar organised by the Human Development Forum on “increase FED on tobacco products” held at a local hotel, here on Monday.

At the Human Development Forum, experts were unanimous on the tax policy to raise the FED on all “tiers/slabs” applicable on cigarettes, and also raise the excise duty on the smokeless tobacco products.

During the seminar, the experts highlighted that presently there are two tax slabs for cigarettes.

An amount of Rs33 FED is imposed on cigarettes costing less than Rs90 per packet and Rs90 on cigarettes with a price of Rs90 and above.

However, these taxes are still below the standard set by the World Health Organization (WHO)’s Framework Convention on Tobacco Control (FCTC) to which Pakistan is a signatory to since 2005.

The FCTC requires signatories to optimally impose a 75 percent tax on the retail price of cigarette packs. Pakistan has yet to achieve this standard.

They proposed at least 30 percent increase in the FED for each slab of cigarettes to enhance revenue collection and lower the consumption of tobacco, especially among youth.

Waseem from Social Policy and Development Centre (SPDC) said that the excise tax in Pakistan is still below 90 billion.

The FBR has achieved it in 2015-2016. Since June 2019, there is no change in the excise duty rate on cigarettes but the prices of cigarettes have increased.

In 2019, the main source of increase in cigarette prices was not the excise duty; it was due to increase in the price net of taxes. The over shifting of taxes in prices serve a dual purpose. It increases the industry’s profit per pack and industry uses this price increase to avoid any tax increase in the tax rate for the year 2020.

The revenue loss to the government due to under reporting in 2017 and 2018 was Rs35 billion and 15 billion respectively.

Based on the above finding, we would recommend an increase in the excise duty rate for the year 2021-2022.

Abid Sulehri, executive director Sustainable Policy Development Institute (SDPI) said that still the government is facing a financial crunch due to the Covid-19 pandemic.

He added that the total economic cost of smoking in Pakistan was estimated at Rs143 billion in 2012.

This includes direct healthcare costs and costs due to lost productivity, according to a 2018 report entitled “Global Economic of Smoking-Attributable Diseases”.

He further added that in order to adjust the inflation rates in the upcoming budget, the government needs to increase the current FED on tobacco products to at least 30 percent.

By doing so, revenues for the government will increase which can be channelised into health and education programme initiatives of the government.

Senator Ayesha Raza Farooq stated that tobacco use is the world’s leading cause of preventable death, according to the WHO.

Increasingly, the burden of tobacco use is greatest in low and middle-income countries that have been targeted by the tobacco industry with its deadly products and deceptive marketing practices.

She stated that increasing taxes on tobacco products is a proven effective measure to control and reduce the consumption of tobacco products.

She also showed her support for increasing taxes on tobacco products, including the FED and health levy, with periodical adjustments of inflation rates in order to make it less accessible to the youth. Tobacco control activists requested Prime Minister Imran Khan to take up the issue of tobacco use in Pakistan and increase taxes, including the FED and health levy, on tobacco products to save our youth from this menace.

Copyright Business Recorder, 2021