Health activists warn against tobacco industry’s false alarm of surge in sale

illicit cigarette trade

Islamabad

Health right activists Wednesday alarmed the government of the tobacco industry’s tactics to scuttle official plans to make cigarettes inaccessible to children by raising tobacco tax in the upcoming budget.

Media reports suggest that the international tobacco industry has created a smoke screen with deceptive statistics to create the impression that the counterfeit tobacco industry has captured the market of the international tobacco companies, and that Federal Board of Revenue should, instead of raising tax, introduce a third tier with lower tax incidence so that the international industry can compete with counterfeit cigarettes, says TheNetwork for Consumer Protection, a not-for-profit organisation spearheading the tobacco control campaign in Pakistan.

But facts speak to the contrary: “international companies are on profit trail, minting money at the cost of public health,” says Nadeem Iqbal, CEO of TheNetwork. Nadeem lamented the fact that the entire statistics about cigarette production and sale are controlled by the tobacco industry, which manipulates data to get policies of its own liking implemented.

According to statistics sold to FBR by the tobacco industry, its sales dwindled in January to April this year, causing a decrease in official revenue collection. However, the fact of the matter is that cigarette production increases manifold closer to the budget when hoarding is done in anticipation of tax increase.

Already, there exist two tiers of tobacco taxation wherein 90% consumed cigarette packs fall in the lower tier with lower tax incidence and less consumed with higher taxes fall in upper tier.

Data show that reducing cigarette tiers and increasing Federal Excise Duty (FED) on cigarettes boost revenue as in 2012-13; when the tiers were reduced to two, the contribution of cigarettes’ tax revenue to the FED jumped up from 43.9% in 2011-12 to 50% the following year.

According to the report, ‘Curbing tobacco use in Pakistan,’ in the 1990’s, when cigarette price was at a decline in Pakistan, a significant 40% per capita increase of cigarette consumption was seen. On the other hand, during 2000-2004, consumption declined by 11% per capita due to increase in cigarette prices.

Responding to the argument that tax increase results in increase in production of counterfeit or duty non-paid cigarettes, Nadeem says, “FBR should not mix two separate issues i.e., enforcement and tax increase, to reduce consumption.”

Worldwide perspicacity of raising taxes on cigarette packs is heating up. Governments have made extraordinary progress in improving tobacco taxation measures as outlined by the Article 6 Guidelines of the World Health Organization’s Framework Convention on Tobacco Control.

WHO report says that in high-income countries, a 10% increase in tobacco prices will reduce youth smoking by about 7% and overall consumption by about 4%. The effect of higher prices on reducing consumption is likely to be greater in low- and middle-income countries as observed in South Africa where increased taxes plummeted smoking rates among the poor and the young. Yet the tax revenues increased. The International Monetary Fund predicted an overall 4-6% reduction in consumption of cigarettes by raising 10 % taxation in Pakistan.

If the government does not come up with tax increase led comprehensive tobacco control measure, the disease burden on public expenditure and out-of-pocket expense of individual taxpayers will remain unaffordable.