Increase in FED on cigarettes: Health advocates call for implementation of World Bank’s recommendation

ISLAMABAD: Health advocates called for immediate implementation of the latest recommendation of the World Bank (WB) for an increase in the federal excise duty (FED) on cigarettes.

During a media interaction here on Friday, the Society for the Protection of the Rights of the Child (SPARC), health advocates emphasized that implementation of this recommendation will ensure a healthier and more prosperous future for Pakistan’s youth.

The recommendation is part of the World Bank’s latest report-Pakistan Development Update (PDU).

Malik Imran Ahmed, Country Director, Campaign for Tobacco Free Kids (CTFK) said in its latest report titled ‘Pakistan Development Update,’ the World Bank highlighted that a significant revenue gain of 0.4 percent of GDP (Rs 505.26 Billion) could be achieved by applying the current rate on premium cigarettes (Rs. 16.50 per cigarette) to standard cigarettes as well.

The report underscores the potential for economic and health benefits through this measure.

The total federal excise duty collection on cigarettes, cement, telcos, etc in Pakistan is currently contributing only 0.5% percent of GDP in revenue during FY21. Cigarette taxation has contributed 0.19% of the GDP, which at current levels as a percentage of GDP, has remained relatively stable in recent years.

Imran added that aligning cigarette taxation with the WB’s recommendation is a crucial step toward safeguarding the health and well-being of Pakistan’s children. Higher excise duty on cigarettes not only deters smoking but also generates much-needed revenue for essential public services.

Dr Khalil Ahmed Dogar, Program Manager SPARC said that government should fully endorse the World Bank’s call for increased federal excise duty on cigarettes. This measure can substantially enhance both fiscal resources and public health outcomes, contributing to a safer and more prosperous future for the children of Pakistan.

Khalil mentioned that Cigarettes in Pakistan are currently taxed through a dual rate system. SPARC supports the World Bank’s findings that applying the current rate on premium cigarettes to standard cigarettes could lead to a significant revenue gain, further reinforcing the need for swift action in this regard.

Director Waseela Foundation Dr. Aman Khan welcomed the recommendation for an increase in federal excise duty on cigarettes in the WB’s report, while the report indicates insufficient tax collection from cigarettes.

He said the report suggests eliminating the dual tax rates on Slab One and Slab Two of cigarettes and implementing a single tax rate. He said that cigarette prices in Pakistan are the lowest in the region, mainly due to the leniency in cigarette taxes.

Copyright Business Recorder, 2023