Minister seeks review of tobacco taxation structure

Islamabad : Minister for National Health Services Aamer Mehmood Kiani has advised the Ministry of Finance to withdraw the third slab of Federal Excise Duty (FDE) on cigarettes as the measure has led to an increase in cigarette production. The measure was introduced in the budget 2017-18.

In a letter written to Minister for Finance, Revenue and Economic Affairs Asad Umer, Kiani has informed that after the introduction of third slab in 2017, local production of cigarettes has increased by 77% compared to production in the previous year. It may be recalled that Kiani had, only last week, announced to coordinate with Ministry of Finance to raise taxes on tobacco products.

The letter states that as a signatory to the Framework Convention on Tobacco Control (FCTC), Pakistan has to implement tax and price policies on tobacco products as a way to reduce tobacco consumption. Moreover, Pakistan is obligated to achieve the targets enshrined in the Sustainable Development Goals (SDGs).

Prior to budget 2017-18, the Ministry of National Health Services proposed to tax the lower slab/tier of all brands of cigarettes @Rs44 per pack of 20 cigarettes. The proposal was based on a study, according to which, uniform specific excise tax that accounts for Rs44 per pack of 20 cigarettes could reduce number of smokers by 13.2%, increase tax revenues by Rs39.5 billion, thereby 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. In Finance Act 2017, a new slab/tier with reduction in FED (i.e., Rs16) was created in the Finance Act, 2017, which resulted in decrease in prices of the most sold brands.

Prior to Budget 2017-18, the Ministry of NHSRC had requested the FBR to withdraw the third slab/tier because it had resulted in increased production of cigarettes. In addition, it also proposed imposition of a ‘Health Levy on Cigarettes,’ which also never became part of the Finance Act, 2018.