Tobacco industry: Tax reforms may generate Rs 205.9 billion more in next three years

Pakistan can generate additional Rs 205.9 billion from tobacco industry over next three years by introducing cogent tax reforms that would also lead to significant reduction in tobacco consumption and health cost in the country. This was revealed by experts and leading consultants on Thursday during a media conference organised by Society for the Protection of the Rights of the Child (SPARC), Human Development Foundation (HDF) and Pakistan National Heart Association.
The experts said that additional tax revenue of about Rs 205.9 billion over 3 years would be equivalent to an average annual increase in total tax revenue of about 51 percent (or about Rs 32.3 billion per year). The experts have also anticipated an increase in the excise tax share in the price from about 45.9 percent currently to 57.6 percent, somewhat closer to the 70 percent level recommended by the World Health Organisation.
Speaking on the occasion, Malik Imran Ahmad from Campaign for Tobacco Free Kids, Pakistan office, said the tax reform model will also contribute to significant reduction in adult cigarette consumption by almost 42 percent (about 28 billion sticks) and reduce smoking prevalence by about 2.15 per person, from 10.4 percent of all adults currently to about 8.3 percent of adults after three years. He explained that the number of smoking-related deaths among current and future smokers would also decrease by about 11 percent which is a reduction of about 1.1 million.
Ahmad said that tax revenue from the tobacco industry sharply fell to Rs 84 billion in 2016-17 from Rs 114 billion after the federal government imposed a three-tier taxation on the cigarettes.
"We believe that additional taxes on tobacco will help the government increase its revenue, and reduce the overall health cost in the country," he said, adding that this would also decrease consumption of cigarettes.
He appreciated the government's decision of imposing health levy on cigarettes, but demanded to increase overall ratio of taxes on the industry by abolishing the three-tier system.
The experts on tobacco taxation have formulated a concrete proposal for tobacco tax reforms and recommend solutions to the federal government on short-term (Fiscal Years 2019/20), medium-term (FY 2020/21) and long-term basis (FY 2021/22).
Participants expressed confidence that recommendations for tobacco tax reform, if adopted by the government, will prove to be an effective policy that will simplify Pakistan's tobacco tax system and reduce government's administrative costs and further align it with best global practices.
Elaborating the tax proposals, the experts demanded the government to implement crucial measures to further strengthen the tax system, regularly increase the excise tax to account for inflation and income growth and reduce cigarette affordability and harmonise all taxes across tobacco products.
They urged the government to fully implement the Protocol to Eliminate Illicit Tobacco Trade, particularly the measures for supply chain control, such as license, tracking and tracing and record keeping, and align the Protocol with the legislation on prosecutions and sanctions for tax evasion.