Effective taxation of tobacco industry linked to revenue generation

PESHAWAR: Speakers at a consultative session on Saturday said that to discourage smoking and increase revenue for the national exchequer, the tobacco industry must be taxed effectively.

Speaking at the event held in a local hotel, they said the tobacco industry in Pakistan is characterized by significant under-taxation, leading to adverse consequences for the economy, society, and public health.

It enjoys comparatively low taxation rates, leading to several detrimental effects on the nation. They said the under-taxation hampers revenue generation for the national exchequer, resulting in limited funds for critical sectors such as healthcare, education, and infrastructure development. Insufficient resources impede socioeconomic progress and inhibit the government’s ability to address pressing public needs.

Also, they said that economically, under-taxation distorts market dynamics, as major tobacco industry players operate as a monopolistic cartel. This lack of competition undermines fair business practices and inhibits market efficiency. Moreover, the under-taxation of tobacco products contributes to an unfair distribution of the tax burden, as other sectors and individuals bear the brunt of higher taxes to compensate for the industry’s inadequate contributions.

Socially, the under-taxation of the tobacco industry perpetuates socioeconomic disparities by reducing available funds for poverty alleviation programmes and social welfare initiatives. This exacerbates income inequality and restricts opportunities for social mobility, hindering the overall development of society.

“Health-wise, under-taxation encourages affordability and accessibility of tobacco products, leading to increased consumption rates. This directly contributes to a range of tobacco-related diseases, including cardiovascular illnesses, respiratory disorders, and various types of almost incurable cancers. The resulting health burden places; additional strain on the healthcare system, leading to increased costs and reduced productivity,” said a speaker.