PHC suspends amendment, increases cigarette price again

PESHAWAR: The Peshawar High Court (PHC) has suspended the amendment in the Finance Bill 2017 that called |for reducing price of a pack of cigarette by Rs16 as a petitioner claimed that the price reduction would expose everyone including children to smoking and also affect the local tobacco industry.

A two-member bench comprising Justice Muhammad Nasir Mehfooz and Justice Shakeel Ahmad suspended till its next order the amendment made by the government in the Finance Bill 2017 through a notification introducing third tier on May 29, 2017 regarding decrease in the price.

The bench issued notice to government through secretary finance, Federal Board of Revenue, Revenue Division through director general, Ministry of Law and Justice through its secretary and Ministry of National Health Service, Regulations and Coordination through its secretary and directed them to submit reply before January 18, which is the next date of hearing in the petition.

The writ petition was filed by Hameed Khan, resident of Swabi, through his lawyer Babar Khan Yousafzai.

In the 2017-18 budget, it said, prices of all brands of cigarettes were to be increased with the aim of reducing tobacco consumption as it is a cause of thousands of deaths (approximately 108800/annually in Pakistan). Instead, the prices were decreased by introducing column 10-A of Section 9 (A)(i) of Federal Excise Act 2005 for ulterior motives to effect upon the rights of the public at large in view of attracting them towards the habit of intake of tobacco products.

During hearing, the lawyer submitted that it is the responsibility of the state to ensure that all its citizens are provided healthcare systems, which cater for treatment of illnesses and ailments, and control consumer products that cause harm to their health.

The lawyer cited recent research carried out by the Coalition for Tobacco Control Pakistan and the Centre for Social Education and Development which revealed that all over the world cigarette prices are increased every year to discourage smoking and save lives from dangerous smoking-related diseases such as impact on lungs, heart, respiratory system and cancer. For the purposes of comparison, he noted that taxes were increased by at least 10 percent in India and 100 percent in the Gulf Cooperation Council (GCC) countries.

“It is extremely unfortunate that the government of Pakistan is playing in the hands of the multinationals to introduce complicated tax structures which make it difficult for common people to understand the implications,” the petition mentioned. In Pakistan, it said, cigarette excise duties have traditionally been applied in two tiers. The first tier was for the cigarettes which were expensive — usually consumed by the upper middle-class and above, while the second tier was applied on cigarettes used by the middle class and below.

The lawyer explained that the tax tier was based on the price as the first tier cigarette with one pack price was more than Rs88.  When the Federal Excise Duty was applied the price was Rs74 per pack. The second-tier cigarettes with one pack were priced less than Rs88 while it was 32.8 when the tax was applied.

He noted that in the recent changes in the Federal Excise Act 2005, the Ministry of Finance lobbied with the help of British High Commissioner, and multinational companies introduced a third tier of taxation, which would introduce a decreased tax on its products. He said tax was decreased to Rs16 for cigarettes with one-pack retail price, which is below Rs58.5.

“This was done even though the Ministry of National Health Service proposed an increase in all taxes and rejected the proposal of a third tier,” he added.

 “This is discriminatory of the local industry. In addition, the introduction of minimum price is brought about to wipe out competition from the local market so the international companies have full control of the tobacco industry in Pakistan,” it said. The petition maintained that “for the purposes of the profits of multinationals, who transfer all dividends to their head offices outside Pakistan — the FBR has been lobbied — through coercion or illegal means to introduce the laws in FA 2017.”

“It is important to keep the youth away from smoking through higher taxation on tobacco products,” it stated.