Ministry proposes increase in tobacco taxes in budget 2016-17

Islamabad

The Ministry of Health has forwarded to the Ministry of Finance, its recommendations for enhancing taxes on tobacco in the budget 2016-17.

The recommendations have been formulated by the Technical Working Group, which comprises representatives of the Federal Board of Revenue (FBR), The Union, the World Health Organization (WHO), the World Bank, and the Tobacco Control Cell.

The experts have recommended that lower slab of all brands of cigarettes be taxed at the rate of Rs44 per pack of 20 cigarettes (from Rs14.20 to Rs. 22 per 10 cigarettes), with annual adjustment to tobacco tax rates introduced to minimize the impact of inflation of per capita income growth.

The recommendations also include removal of exemptions of tobacco taxes provided at Serial No. 4 of the Schedule 3 of Federal Excise Act (i.e., Navy, President of Pakistan President of AJK and the Governors of the Provinces, members of their families and guests).

The Working Group has also called for earmarking 2 per cent of tobacco tax revenue for the Prime Minister’s National Health Programme for the treatment of non-communicable diseases.

According to a research study on tobacco taxation in Pakistan, jointly conducted by FBR, World Bank, University of Toronto, Johns Hopkins University, University of Illinois at Chicago, and Beaconhouse National University, a uniform specific excise tax that accounts for Rs44 per pack of 20 cigarettes could reduce the number of smokers by 13.2 per cent and increase tax revenues by Rs39.5 billion, leading to reduction of 0.65 million premature deaths caused by smoking among current smokers while also preventing 2.55 million youth from taking up smoking. Increase in taxes will be critical to reducing consumption of tobacco products and save lives.

Pakistan signed the Framework Convention on Tobacco Control (FCTC) in 2004. Under Article 6 of FCTC, Pakistan has to implement tax and price policies on tobacco products in a way to reduce 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 health care costs including medical expenses.

As far as increase in taxes is concerned, the ball is now in the court of the Ministry of Finance. However, the Ministry of Health also needs to fulfill its earlier commitment of increasing the size of pictorial health warnings on cigarette packs. Pakistan was even awarded by WHO for its decision to increase the size of graphic health warnings, but the commitment was withdrawn because the Ministry of Health succumbed to the tobacco industry’s pressure tactics.