The international community observed The World No Tobacco Day on 31 May 2022. In the case of Pakistan, however, the Day reminded us all the sordid reality that the cigarette affordability, the key tool to curb smoking, has increased in Pakistan over the past three years, since the Cabinet approved the additional imposition of Rs 10 tax per packet, which remained a dead letter.
Despite the fact that the tobacco destroyed around 200,000 lives in Pakistan during the last year, and the smoking-induced economic burden becomes as high as 1.15 % of the GDP, the country languishes at a very low score of 1.13 in a score range of 0 to 4 on Tobacco Tax Index, notwithstanding the fact that Pakistan signed the WHO Framework Convention on Tobacco Control in May 2004.
Tobacco use control measures are gaining traction all over the world due to a better awareness of their negative impact on health and attendant socio-economic effects on a large number of people.
The increasing awareness, however, has produced variable impacts on policy formulation and effective enforcement in different countries. Pakistan is one such country where, lately, there is a visibly better awareness of the issues at the Federal Ministry of National Health Services, Regulations and Coordination but the movement on ground in terms of more robust policy and institutional infrastructure development has been painfully slow.
The inability of the government to increase the taxation on cigarettes to create a more effective disincentive to smoke is a classic case of lack of political will to pursue its own social policy goals. Last year, Pakistan lost 200,000 of its citizens to smoking. There is irrefutable scientific evidence on the health harms of smoking as well as robust evidence from the regional and international examples that more expensive cigarettes reduce the incidence of smoking. Yet, the agreement of the Federal Cabinet to levy an additional tax on cigarettes in the lead up to the Finance Bill in June 2019 has not yet been implemented, despite a lapse of three years.
Higher taxation is one of the key measures aimed at reducing the incidence of direct and indirect smoking. The WHO Framework Convention on Tobacco Control (WHO FCTC), which was ratified by Pakistan also has made it a policy goal, which the governments, which have ratified the Convention are expected to comply. The Health Ministry expecting, back in June 2019, a resource of around Rs 30 billion, as a result of the new levy, per annum on the basis of the anticipated use of 3 billion packs of Cigarettes, proposed to set up a dedicated agency at the Ministry to control the smoking damage and to improve the health indicators in the country in general.
The government could have saved many lives during the past three years. But the political economy of the Tobacco Industry continues to obstruct a better balance between health and private profits. The nonchalant attitude of the government to curb smoking has been one of the major social policy failures of the PTI government. With the change of government, there is a renewed hope.
The Social Protection Resource Centre, Islamabad with its partners tried to galvanize the pro-health forces to persuade the government to save the citizens, including the children and women from the grave harm of smoking and collect more revenue from the industry in the process through a pre-budget webinar and a Policy Dialogue recently. We sincerely hope that the government of Shehbaz Sharif and the new Health Minister would give due importance to the following policy recommendations discussed and developed during the two events:
• Given the fact that the tax proposal by the Ministry of National Health Services, Regulations and Coordination, passed by the Cabinet in June 2019, stipulating the creation of a Health Fund for the Ministry of National Health Services, Regulations and Coordination [MNHSR&C], on the basis of an additional tax of Rs 10 tax on each pack of cigarettes, has been allowed to languish, causing big new health harms during the past 3 years, it is proposed that the Cabinet decision is implemented forthwith by the relevant government agencies.
• It is proposed that the Ministry of Health, Government of Pakistan should not only pursue its 2019 proposal much more vigorously, but it should also take a three-year plan to the Cabinet of automatic yearly increase from the Budget 2022-23 to enhance the total incidence of tax in the final counter price to 70 % in real terms, with the provision of upward revision of retail cigarette prices through an automatic yearly inflation adjustment.
• Recognising that the two-tier current system, with a far lower tax rate on the lower band, which also enhances the affordability of low-priced cigarettes, becomes the main mechanism of tax evasion through misdeclaration, it is proposed that the government implements a single tax tier for cigarettes.
• Realising that the IMF has been promoting different social causes in its engagements with many countries, with the help of policy actions, including tobacco control, it is proposed that the policy community in Pakistan reaches out to the IMF to engage the government of Pakistan for a planned increase in tax on cigarettes well above the 70 % of final price by an automatic increase each year for the next three years and help design a medium to long term plan of action for Tobacco Cessation in Pakistan.
• On the basis of now universally recognized principle of Polluter-Pays, it is proposed that the cigarette industry declared directly responsible for the past and ongoing harm, going beyond the Harm Alert to User. As a first step in that direction, it is proposed that the government establishes an indemnity/redemption fund, contributed by the Industry from its profits and dedicated to mitigate the effects of tobacco harm.
• Recognising the negative role played by the enforcement gaps, it is proposed that the enforcement measures by Federal Board of Revenue (FBR) are strengthened, including a fast-track implementation of Track and Trace System, by giving FBR clear targets to enhance enforcement efficiency in a predictable time frame to curb the high level of evasion and malpractice. It is proposed that a Special Monitoring Unit be established in FBR Islamabad to continuously monitor the progress to reduce the possibility of collusion and enhance the enforcement capacity of the ground staff.
• Given the slow implementation of the much-awaited Track and Trace System, it is proposed that the Ministry of Finance carries out an investigative case study on the immediate challenges in the implementation of the Track and Trace System in Pakistan.
• In order to reduce the role of FBR and Ministry of Finance in the final determination of Taxes on Cigarettes, it is proposed that a ‘Smoking Control Policy Board’ is established, chaired by the Minister of Health, with representation from Ministry of Finance, FBR, provincial health departments, industry and independent experts. The policy board should also be mandated to plan help implement a smoking-free Pakistan.
(The writer is Executive Director of Social Protection Resource Centre, Islamabad)
Copyright Business Recorder, 2022
The writer is Executive Director of Social Protection Resource Centre, Islamabad
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