Cabinet set to discuss sin tax for increasing health budget

ISLAMABAD: The federal cabinet is set to take up today (Thursday) a health levy draft bill aiming to impose 'sin tax' on cigarettes and sugar-sweetened beverages to raise money for health insurance scheme and fatal disease programme in line with the vision of Prime Minister Imran Khan. This type of taxation is already in vogue in different countries.

The bill titled “The Federal Health Levy Bill, 2019” is to be presented by the Ministry of National Health Services, Regulations and Coordination for the cabinet approval after which it will land in the Parliament. Only passage from there will convert it into a law for enforcement. The bill envisages imposition of health levy on cigarette packs at the rate of Rs10 per pack of 20-cigarette sticks. This levy will also be imposed on sugar-sweetened beverages at the rate of Rs1 per bottle of 250 mls.

“The health levy shall be charged, levied and paid on manufacture, sale or transfer of cigarettes and sugar-sweetened beverages (harmful products) by the manufacturers, producers and importers,” reads the summary prepared for presentation before the cabinet. The revenue collected through this levy, reads the draft, shall be allocated to the health budget of the federal government.

The revenue earned shall be used for expenditure for schemes, programmes, activities and or research designed for the improvement of general health of the people and to reduce the human and economic costs due to various diseases.

“For the purpose of collection, payment and recovery of health levy and penalty, if any, the provisions of the Sales Tax Act, 1990, shall mutatis mutandis apply,” reads the draft. As the imposition of any tax falling within the meaning of a money bill as provided in Article 73 (2) (a) of the Constitution is moved in the National Assembly, the Cabinet Division had earlier suggested seeking opinion from the Finance Division (in particular of Federal Board of Revenue) and Law and Justice Division.

While Finance Division agreed in principle, the FBR didn’t support the proposal quoting different articles of the Constitution including the Federal Legislative List, devolution and illicit trade issues. The Law Division however cleared it saying the contents of the legislation tend to meet the requisites of Article 73, for the bill to be declared as money bill. Right now, the federal health budget is quite negligible (around 0.6pc). The health practitioners and scholars have been demanding imposition of heavy penalties on non-productive and hazardous to health products like cigarettes, beverages and fast foods to discourage their consumption and increase the health budget.

Presently, such health levies are being charged in around 45 countries, Dr Asad Hafeez, Director General of the Health Ministry, told a newspaper recently. “The United States charges about $1.5 per pack of cigarettes, while the UK charges 40 pence per liter of sugary beverages as sin tax. Thailand, as well as a number of other countries, have similar taxes earmarked for healthcare services,” he’s reported to have explained. In India, he continued, a sin tax on gutka and paan masala has been imposed and the revenue generated is spent on healthcare. A report of the Health Ministry quoted in an English newspaper in December last year declared tobacco as “the single largest cause of preventable illness and death.” In Pakistan, the report said, it causes some 108,800 fatalities annually which, in other words, means 298 death per day.