Islamabad: An Islamabad-based think tank has supported the statement of Deputy Managing Director of the International Monetary Fund (IMF), Antoinette Sayeh which has stressed on Pakistan to capitalise the hard-won stability.
It should be mentioned that following the discussion of the Executive Board of the IMF, Deputy Managing Director and Chair, has pressed on the country to ‘capitalise on this hard-won stability...with sound macroeconomic policies and structural reforms to create stronger, inclusive, and sustainable growth.’
The think tank, Capital Calling, stated that it was encouraging that the country has succeeded in getting ‘an immediate disbursement of SDR828 million (around $1.1 billion), bringing total disbursements under the arrangement to SDR2.250 billion (about $3 billion).’
However, it pointed out that multinational cigarette companies are seemingly unhappy with this ‘hard-won stability’ that the country has achieved. It said that taxes on non-essential items like cigarettes should be brought at a par with international standards. We are the cheapest in the region as far as cigarettes are concerned.
The World Health Organization (WHO) parameters set for taxing cigarettes take into account the volume of mortality and morbidity that this products causes in the society. Research reports have mentioned that over 24 million Pakistanis are active smokers inflicting irreparable damage on passive ones.
The country has turned into a haven for cigarette production as it was counted among the 9 poor states that account for production of 90 percent of cigarettes for the world. It has become the haven for tobacco sector because of enormous power MNC’s enjoy over regulators here in Pakistan.
Only this power of manipulation was responsible for estimated loss of Rs567 billion in last seven years. These figures are revealed by a recently conducted study SDPI.
The think tank also quoted a research report by PIDE, a government entity, revealing “when the government abolished the third tax tier in 2019which effectively reduced the tobacco industry’s manoeuvring space to sell cheaper cigarettes by avoiding taxes, the tax contribution of the industry actually increased to Rs120 billion compared to Rs92 billion in 2016. This raised the tobacco industry’s share of total tax collection to 3 percent from 2.15 percent in FY16.”
It went on to say, “The government’s reluctance to change tobacco tax policy is partly due to its failure to fully appreciate the smoking-attributable fraction (SAF) of health and social costs. This makes its benefit-cost analysis of tax revenue faulty and compromised over e health outcomes.”
Therefore, Capital Calling, has called for taking the health cost of cigarettes into account at the time of fixing taxes on this industry of non-essential goods so that it does not lose its “hard-won stability”. This, it said, is one of the many essential steps to take though.