ISLAMABAD: The International Monetary Fund (IMF) has said that the consumption of cigarettes in Pakistan has witnessed a notable decline of 20-25 percent following a significant increase in prices or taxes on tobacco products.
Sources told Business Recorder that this has been revealed in IMF’s report– “Pakistan Tax Policy Diagnostic and Reform Options”. The report has been submitted to the Federal Board of Revenue (FBR).
Earlier, the fund advocated imposition of uniform excise rates on both local and foreign cigarette manufacturers.
Referring to the report, sources said, “the FED rates on tobacco products were gradually increased between 2019 and 2022, and then saw a big increase by on average 146 percent in February 2023. Survey findings suggested that as a result of this increase, the consumption of cigarettes has declined by 20-25 percent”, sources quoted report.
The fund’s proposal, which advocated for equal taxation measures for all cigarette producers, aims to address health concerns associated with smoking while ensuring fair taxation practices. It suggested subjecting e-cigarettes to similar taxation as traditional tobacco products, citing comparable health impacts.
Capital Calling, an Islamabad-based think tank, has endorsed the IMF’s recommendation, aligning it with the guidelines set forth by the World Health Organization (WHO).
The objective behind these proposals is to establish equitable taxation across all cigarette products, regardless of their origin.
At a recent event organized by the Society for the Protection of the Rights of the Child (SPARC), activists urged the government to transition to a Single Tier Tobacco Taxation System, thereby eliminating the existing dual-tier system.
Malik Imran Ahmed, Country Head of Campaign for Tobacco Free Kids (CTFK), underscored the alignment between the IMF’s recommendations and ongoing discussions within Pakistan. These discussions aim to address fiscal and external sustainability weaknesses while promoting economic recovery and inclusive growth.
Ahmed stressed the urgent need to reform Pakistan’s cigarette taxation system as part of broader efforts to strengthen public finances and enhance debt sustainability.
The IMF’s advocacy for taxation on tobacco products is not only aimed at reducing cigarette consumption but also at generating additional revenue for the government, he added.
Copyright Business Recorder, 2024
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