Pakistan News

More taxes on tobacco products proposed

More taxes on tobacco products proposed

ISLAMABAD: In a letter to Finance Minister Ishaq Dar, Minister for National Health Services Saira Afzal Tarar on Friday suggested implementing the tax and price policies on tobacco products in the 2016-17 budget as recommended by the World Health Organisation (WHO).

She proposed that 2pc of the tobacco tax revenue should be allocated for Prime Minister’s National Health Programme (PMNHP) for the treatment of diseases spread by the use of tobacco. She added that the imposition of the tax would increase the revenue by Rs39.5 billion.

Over a decade, efforts have been made to reduce the tobacco consumption. Pakistan introduced a textual warning on the cigarette packets in 1979.

The prohibition of smoking ordinance was passed in 2002 which also improved the textual warning on the packets. In 2004, Pakistan ratified the WHO Framework Convention on Tobacco Control (FCTC) and in 2009 a pictorial warning was introduced on packets of cigarettes.

On the World No Tobacco Day on May 31, 2014, Ms Tarar announced that she would change the pictorial warning and increase its size on the packets of cigarettes from 40pc to 85pc within a year. However, this decision could not be implemented due to the alleged pressure from the tobacco industry.

In the letter written to the finance minister, Ms Tarar said under Article 6 of the FCTC, Pakistan had to implement the tax and price policies on tobacco products to reduce the tobacco consumption.

“Tobacco taxes that translate into price increases are considered the single most effective option for reducing tobacco use and increasing revenues. Higher tobacco taxes save money by reducing tobacco-related healthcare costs, including medical expenses,” she said.

In order to finalise recommendations to increase taxes on tobacco products in line with FCTC recommendations, a technical working group on tobacco taxation was formed by the ministry.

Experts from the Federal Board of Revenue (FBR), the Union (Bloomberg Partner), WHO, World Bank and Tobacco Control Cell were members of the group. The group has recommended increasing taxes on tobacco products in the federal budget 2016-17.

“It is recommended that the lower slab of all brands of cigarettes may be taxed at the rate of Rs44 per pack of 20 cigarettes (from Rs14.20 to Rs22 per 10 cigarettes),” she said.

The cigarette packets are categorised in lower and upper slabs. Packets of 20 cigarettes which have a retail price of up to Rs72 are ranked in the lower slab and those with the retail price of over Rs72 are included in the upper slab. Currently, the tax rate for the lower slab is Rs28.40 and for the upper slab it is Rs64 per packet.

Mr Dar was informed that according to a research study on tobacco taxation in Pakistan conducted by the FBR, World Bank, University of Toronto, Johns Hopkins University, University of Illinois at Chicago and other institutes, a uniform specific excise tax that accounted for Rs44 per pack of 20 cigarettes could reduce the number of smokers by 13.2pc.

Moreover, the study also showed that if the tax was increased to Rs44 per pack, the revenue will go up by Rs39.5 billion, avoiding 0.65 million premature deaths caused by smoking among current smokers.

The study also showed that the increase in the prices would prevent 2.55 million youth from taking up smoking.

Ms Tarar also suggested that all exemptions on tobacco taxes given to the Navy, the presidents of Pakistan and Azad Jammu and Kashmir and the governors of provinces, members of their families and guests should be withdrawn.

It was also suggested that 2pc cent of tobacco tax revenues should be set aside for the treatment of non-communicable diseases.

The project director of Tobacco Control Cell, Mohammad Javed, told Dawn that last year the technical working group had recommended increasing the federal excise duty to Rs31.20 per packet for the lower slab but the tax was increased to only Rs28.40.

The WHO has recommended that the tax should be 75pc of the retail price, which would be Rs44 per packet, he added.

Published in Dawn, March 26th, 2016

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