Islamabad : Higher tobacco tax can help generate Rs205.9 billion revenue in the next three years, said Malik Imran of the Campaign for Tobacco Free Kids, Pakistan office.
Addressing a pre-budget session on tobacco tax held by the Society for the Protection of the Rights of the Child (SPARC) at a hotel here, Malik Imran anticipated an increase in the excise tax share in the price from 45.9 per cent to 57.6 per cent against the 70 per cent recommended by the World Health Organisation.
He recommended tobacco tax reforms and recommend solutions to the federal government on short-term (2019-20), medium-term (2020-21) and long-term basis (FY 2021-22).
The expert said the tax reform model would help significantly reduce adult cigarette consumption by almost 42 per cent (around 28 billion sticks), smoking prevalence from 10.4 per cent of all adults to around 8.3 per cent of adults after three years, and the number of smoking-related deaths among current and future smokers by 11 per cent, a 1.1 million reduction.
He said that the volume of illicit trade was very low as claimed by the tobacco industry while the data presented to the government by the industry was also challengeable.
Executive Director of SPARC Sajjad Ahmad Cheema said big tobacco industry caused a whopping Rs153 billion loss to the national exchequer from 2016 to 2019 by being awarded low tax rate and adjusting the prices of their most sold brands.
Almost 90% of all brands consumed in Pakistan were taxed as “low” tiers under the previous tax system (FY 2016-17). If their prices had remained the same, most would have automatically been reclassified as “medium” (89% of them).
However, we find that big tobacco companies made deliberate adjustments in prices resulted in a significant price reduction, causing in 88% of the market being taxed at the new lowest rate in the current tax system.
After the introduction of the third tier, around 160 billion cigarettes were produced between May 2017 and March 2019. Big tobacco companies share 75% of the total market, which means they were able to sell 120 billion cigarettes in the same period. Loss of revenue due to the introduction of the third tier (low tobacco taxes) is Rs77.85 billion from 2016 to 2019. Loss of Revenue due to Price Adjustments is Rs75 billion from 2018 to 2019.
The speakers expressed confidence that recommendation for tobacco tax reform, if adopted by the government will prove to be an effective policy that will simplify Pakistan’s tobacco tax system, thus reducing the government’s administrative costs (improve enforcement and compliance) and further align it with best global practices.
They said the proposal could significantly reduce tobacco use and save lives while raising significant additional tax revenue that can fund government health programmes, including those for tobacco control.