Sunday May 28, 2023

‘Higher tax on tobacco beneficial for economy’

By Our Correspondent
May 18, 2023

Islamabad:Taxation is a key revenue source for any government and taxing non-essential items such as tobacco leads not only to a cut in budget deficit but also in the expenditure on diseases.

During an event here, Malik Imran, country head at the Campaign for Tobacco-Free Kids, said due to government’s decision of increasing Federal Excise Duty (FED) on cigarettes in February 2023, an additional Rs11.3 billion FED revenue was obtained in fiscal year 2022-23 that was an increase of 9.7% from the previous year.

He also said Rs4.4 billion VAT revenue was obtained in fiscal year 2022-23, which was an increase of 11.5% from the previous year. "This additional Rs15.7 billion revenue makes up 0.201% of GDP which is a significant boost for a struggling economy like Pakistan," he told an event organized by Society for the Protection of the Rights of the Child (SPARC).

In the event, health activists presented a simulation model on tobacco taxation, which explained how increased tobacco taxation is a win-win situation for the government and people of Pakistan. Imran said those self-explanatory figures reveal that increased taxation was beneficial for economy but the tobacco industry misleads everyone by crying the illicit trade excuse. He added that the blown up figure of illicit trade is used to divert people from the under-reporting.

"These companies under-report their production and then sell their non-reported products in the illicit market, causing billions of loss to the national exchequer." Dr. Ziauddin Islam, a retired government employee, said that tobacco was the largest silent killer in Pakistan as above 170,000 people died from tobacco use each year. He said the pandemic also caused an annual economic burden of Rs 615 billion, which was 1.6% of Pakistan’s GDP. "Increased prices bring a decrease to production and consumption which decrease the health cost burden."

He said according to the estimates, there has been 31.7% decline in declared production of cigarettes in fiscal year 2022-23 compared to the previous year. "Learning from this example, which is also recommended by World Health Organization, Pakistan should increase taxes on regular intervals so that inflation and per capita income is accounted for and Pakistanis remain protected from harms of tobacco products," he said. Program Manager of the SPARC Khalil Ahmed Dogar said that the children of Pakistan were being targeted by the tobacco industry so that “replacement smokers” could be recruited. He said increased tobacco prices remained the most effective tool in keeping these killer products away from spending power of children and low-income groups.