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Govt can boost revenue by 40b with optimised tobacco taxation

By APP
May 29, 2024
The image shows a tobacco company worker holding cigarettes. — AFP/File
The image shows a tobacco company worker holding cigarettes. — AFP/File

Islamabad: Health advocates have proposed a 40 per cent increase in taxes on tobacco products in Pakistan to reduce consumption, increase revenue and bridge the gap in health costs associated with smoking.

This proposed increase would translate into a substantial rise in government revenue, estimated to reach Rs336 billion from the current Rs240 billion. The intervention would also significantly impact health costs associated with smoking, projected to be reduced from Rs615 billion to Rs418.2 billion, effectively reducing the gap between revenue and health costs to Rs82 billion.

Murtaza Solangi, former caretaker minister of Information and Broadcasting of Pakistan, said all stake-holders must cast their differences aside and unite to protect our children and youth from an industry which is causing billions of losses to the national exchequer. Increasing tobacco taxes is such a step which should be regularly implemented.

The low cigarette prices are the reason why children and young people initiate smoking. He added, that smoking-related illnesses and deaths incur substantial economic costs in Pakistan’s GDP every year. These increasing health cost burdens encompass health-care expenses, productivity losses due to illness and premature death, as well as other indirect economic impacts.

Malik Imran Ahmad, Country Head Campaign for Tobacco Free Kids (CTFK) said that the effectiveness of high tobacco taxation as a vital measure in combating tobacco consumption, as advocated by the World Health Organization (WHO). The industry can absorb at least a 40% increase in taxes, and the IMF and World Bank have recommended Pakistan introduce a single-tier tax structure for cigarettes.

Despite efforts to increase taxes, low cigarette prices persist, contributing to sustained high consumption levels. By adopting these reforms, Pakistan can make cigarette taxation more effective and align it more closely with international best practices. He further added that the cigarette prices in Pakistan are still cheaper than in many parts of the world.