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June 13, 2019

‘Tobacco control back to square one’

Islamabad

June 13, 2019

Islamabad: Dismayed by the Ministry of Health’s compromise with respect to imposition of health tax and its contentment with abolishing the third tier from cigarette tax, TheNetwork for Consumer Protection believes tobacco control is back to square one and where it was three years ago in 2016-17.

On the eve of the annual budget, the Ministry of National Health Services had claimed to have obtained the Federal Cabinet’s approval for imposition of health tax on cigarettes and carbonated drinks, adding that the revenue thus generated will be spent on health. The budget proposal, on the contrary, contains no such mention.

“Even the congratulatory messages on health tax sent to Pakistan by the World Health Organisation’s Regional Director Dr. Ahmed Al-Mandhari’s went up in smoke. Instead of getting health levy, the Ministry lost budgetary allocations by almost 50% from previous year’s budget of Rs25 billion, of which it could only realise around Rs8 billion after cut in the Public sector Development Programme. On anti-smoking, the NHRSC had to eat humble pie as the most consumed cigarette brands remain cheaper and accessible to the bulging youth of the country,” a press statement issued by TheNetwork states.

The CEO of the organisation Nadeem Iqbal maintained “Health tax is not a tax but a new concept that is alien to Pakistan’s financial system. The ministry needs to do a lot of effective homework and generate statistics to convince finance managers as this idea was first shot down in the Parliament and then in the Cabinet early this year before being approved by the Cabinet later last month.” Therefore, Nadeem says, Federal Excise duty remains a tax that is imposed to reduce the consumption of hazardous items. “In addition, the target of collecting Rs147 billion taxes from cigarettes seems very ambitious as last year, the government could not even achieve the target of Rs114 billion,” he added.

In the budget proposal 2019-20, the government has increased prices of cigarettes by raising FED from Rs90 to Rs104 per pack of 20 cigarettes on upper tier (low consumed) and has adjusted Rs33 for 2nd tier (highly consumed) by removing the 3rd tier introduced in 2017-18. When the 3rd tier was introduced, almost 80% of the most-sold brands fell in 3rd tier and their prices were reduced by 50% and average FED ratio declined from 57.5% to less than 45%, TheNetwork informs. FED collection saw a sharp decline from Rs90 billion in 2015-16 to Rs66 billion in 2016-17, further decreasing to Rs65 billion in 2017-18. “The two tier tax system brings better revenues no doubt as FED collection increased from Rs16.1706 billion in 2012-13 (when two tier was introduced) to Rs90.4353 billion in 2015-16. With the proposed FED rate that would collect Rs147 billion in revenue, the overall prices of cigarettes would increase by Rs10-14, raising the FED ration by around 60% on a cigarette pack which will still remain way lower from the WHO recommendations 75% of a cigarette pack. However, average FED ratio in 2016-17 was roughly position 57%, TheNetwork adds.

Article 6 of the WHO Framework Convention on Tobacco Control (FCTC) calls for “Price and Tax Measures to Reduce the Demand for Tobacco”. Guidelines of Article 6 call for measures to increase taxes on tobacco products (at least 75% of retail price). Moreover, although Pakistan has signed the protocol on illicit trade in tobacco products, no action plan has been introduced as yet to curb illicit trade of tobacco products.

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