A technical working group of Ministry of Health on tobacco taxation comprising experts from Federal Board of Revenue (FBR) and other organisations has proposed withdrawal of tax exemption on tobacco products provided to Navy, President of Pakistan, President of Azad Jammu & Kashmir and the Governors of the Provinces, members of their families and guests in the budget (2015-16).
Sources said that the budget makers were considering the taxation proposals submitted by a technical working group on tobacco taxation comprising experts from FBR, The Union (Bloomberg Partner), World Health Organisation, World Bank and Tobacco Control Cell. The FBR will duly consider the proposals of the working group on tobacco taxation before revision of the FED slabs on cigarette in 2015-16.
According to the budget proposal for tobacco products for fiscal year 2015-16, the lower slab of all brands of cigarettes may be taxed at the rate of Rs 31.2 per pack of 20 cigarettes (from Rs 10.85 to Rs 15.6 per 10 cigarettes) with annual adjustment to tobacco tax rates introduced to minimise the impact of inflation and per capita income growth.
Saira Afzal Tarar, Minister of State for National Health Services, has forwarded the budget proposals for 2015-16 to the government for consideration.
Ministry of Health said that Pakistan signed Framework Convention on Tobacco Control (FCTC) in 2004. Under Article 6 of FCTC, Pakistan has to implement tax and price policies on tobacco products as a way to reduce tobacco consumption.
Tobacco taxes that translate into price increases are considered the single most effective option for reducing tobacco use and increasing revenue. Higher tobacco taxes save money by reducing tobacco-related health care costs, including medical expenses. According to a research conducted in a number of countries, higher taxes are effective in reducing tobacco use among lower-income groups and in preventing young to go for smoking.
In order to finalise recommendations to increase taxes on tobacco products in line with FCTC protocol, a technical working group on tobacco taxation was formed by the Ministry. Experts from Federal Board of Revenue, The Union (Bloomberg Partner), World Health Organisation, World Bank and Tobacco Control Cell were members of the working group.
To finalise recommendations to increase tobacco taxes in Federal Budget 2015-16, three meetings of the working group were held. In these meetings, the group reviewed the existing tobacco tax structure in Pakistan, examined the tobacco tax system in other countries, reviewed the tax-related studies/literature and worked on finalising recommendations to increase taxes on tobacco products especially cigarettes in line with FCTC recommendations and earmarking tobacco tax revenues for tobacco control measures.
After detailed deliberations, the group made key recommendations to increase taxes on tobacco products in Federal Budget 2015-16:
Firstly, lower slab of all brands of cigarettes may be taxed at the rate of Rs 31.2 per pack of 20 cigarettes (from Rs 10.85 to Rs 15.6 per 10 cigarettes) with annual adjustment to tobacco tax rates introduced to minimise the impact of inflation and per capita income growth.
Secondly, all exemptions of tobacco taxes provided in S. No 4 of the Schedule 3 of Federal Excise Act (ie Navy, President of Pakistan, the President of Azad Jammu & Kashmir and the Governors of the Provinces, members of their families and guests) should be removed.
Thirdly, tax on other tobacco products mentioned in Schedule I of Federal Excise Act (ie Un-manufactured tobacco, Cigars, cheroots, cigarillos and cigarettes, of tobacco substitutes) may be raised.
Fourthly, it is proposed to earmark tobacco tax revenues (1 percent of total revenues) for health purposes, including health promotion, tobacco control and Health Insurance.
All other tobacco products like Naswar, Gutka, Pan Masala, Mainpuri etc may be regulated and brought into tax net.
According to a research study on tobacco taxation in Pakistan jointly conducted by FBR, World Bank, University of Toronto, Johns Hopkins University, University of Illinois at Chicago and Beaconhouse National University, a uniform specific excise tax that accounts for Rs 31 .2 per pack of 20 cigarettes could reduce overall cigarette consumption by 7.5 percent, increase tax revenues by Rs 27.2 billion, leading to over half a million users quitting and reducing premature deaths among current adult smokers by over 180,000, while preventing 725,000 youth from taking up smoking.
It is requested that necessary directions may be issued to the concerned for inclusion of the above in 2015-16 budget proposals. This measure will be critical to reducing consumption of tobacco products and saving lives of people, Saira Afzal Tarar added.
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