Higher taxation on legal tobacco industry to increase illicit trade

karachi: Pakistan needs huge sums of money to fight the pandemic caused by novel coronavirus. One way of generating the hard required funds is to curb the illegal tobacco trade within the country.

According to the laws of the Health Ministry, a pack of cigarettes sold in Pakistan should bear the Graphical Health Warning (GHW), it cannot be sold below the officially set prices and should not be advertised in any manner.

Unfortunately, health ministry is unable to implement and enforce these laws on ground, and illegal manufacturers continue to operate freely and sell undocumented cigarettes on discounted prices while continuing to advertise locally. Surprisingly, the major chunk of these illegal cigarettes are not being smuggled into the country, but are from the home-grown illegal trade.

To generate additional funds, some quarters have suggested the government to impose Rs10 health tax on tobacco products and Re1 on carbonated drinks, ignoring the fact that just illegal trade of tobacco is causing an annual loss of Rs44 billion.

If Health ministry focuses on implementing its laws and FBR takes action against illegal trade in the country, government may generate more funds.

Moreover, in the Budget 2019-20 speech; the then Revenue Minister had clarified that there is no need to impose more taxes in the name of Health.***