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High cost of low price

Every year the world observes 'No Tobacco Day' on May 31 with emphasis on how to discourage people from smoking and countering the efforts of cigarette companies aimed at marketing themselves in different and novel ways. Another major objective of cigarette companies is to keep their products low-priced, not by parting with their profits but by getting tax reliefs from governments through lobbying and exaggerating figures about illicit trade.

This year the day highlighted the negative effect smoking has on young people and the tactics used by the tobacco industry to gain volumes. There is a growing concern that the main focus of attraction for the tobacco industry is the much younger clientele because the number of older ones has come down due to increased restrictions, disease and deaths due to smoking.

The issue is so pressing that last month the World Health Organization (WHO) launched a kit for school students aged 13 years to 17 years to alert them to the tobacco industry tactics used to hook them to addictive products. The WHO estimates that every year the tobacco industry invests more than $9 billion to advertise its products. Increasingly, it is targeting young people with nicotine and tobacco products in a bid to replace the eight million people that its products kill every year, the global health watchdog adds.

The toolkit has a set of classroom activities including one that puts the students in the shoes of the tobacco industry to make them aware of how the industry tries to manipulate them into using deadly products. It also includes an educational video, myth-buster quiz, and home assignments. In countries where cigarette price is low, the probability of young people taking up smoking is high due to affordability. Anti-tobacco campaigners are ultra sensitive in this context and oppose tax reliefs for cigarette companies that ultimately result in bringing the prices down and luring younger people to join the pool of existing smokers.

Coming to Pakistan, one finds smoking causes more than 160,000 deaths annual – a figure revealed in a a study conducted by the Human Development Foundation (HDF). These numbers are very alarming, but unfortunately tobacco control is a tough challenge for the government which is addicted to the taxes received from the cigarette companies, especially the two multinational ones – Phillip Morris Pakistan (PMI) and Pakistan Tobacco Company (PTC). On the one hand, it wants to comply with the international commitments it has made on tobacco control, and on the other it does not want to estrange the influential cigarette companies. Amid all this, there is regular increase of new smokers every year and occurrence of diseases and deaths among the existing ones.

The HDF study cited above also mentions that smoking increases financial burden on smokers as well as their families and cost of healthcare if they contract any dangerous disease due to smoking. It is a well-known fact that smoking directly affects human lungs and makes smokers victims of respiratory diseases. Cancer is also a disease that many smokers have to face.

The whole world is aware of the hazards of smoking and that is why a large number of countries have come on the same page and suggested measures and rules to counter this menace. This includes ban on sale of cigarettes to young people and placing of graphic pictorial warning on cigarette packets, prohibition to sell cigarettes close to schools, making cigarettes expensive through imposition of taxes, fixation of minimum price less than which a cigarette packet cannot be sold, restriction on sellers to sell loose cigarettes etc. The objective no doubt is to keep cigarettes out of the reach of people through different measures including price control.

These measures and others similar to these have been recommended under the WHO’s Framework Convention on Tobacco Control (FCTC) to which Pakistan is also a signatory. This convention asks member states to take measures to discourage smoking. It always proposes members of these states to increase taxes on tobacco products so that they become expensive for buyers and their demand falls. On the other hand, if prices are reduced through low taxation, demand increases and especially young people are attracted to smoking.

All over the world, countries are gradually increasing Federal Excise Duty (FED) as suggested by the WHO convention to ultimately bring the tax to around 70 percent of the packet price. In Pakistan, the government keeps on changing its policy every other year. If in one year the tax rate is increased the next year comes relief though the country is bound to increase tax gradually under the WHO’s FCTC.

The plea mostly taken by the leading cigarette companies is that there is huge illicit trade and smuggling of cigarettes from abroad when local products become too expensive due to high taxation. They claim that as in illicit trade and smuggling duties are evaded they have a ready market in the country. They argue: who will buy a cigarette packet worth Rs70 to Rs80 when those between Rs40 and Rs50 are available?

Interestingly, the cigarette companies do not hold government officials responsible for not busting illicit trade but term the taxes on cigarettes the biggest culprit. On the other hand, anti-tobacco campaigners do not accept their argument and term the plea of illicit trade a tool to avoid higher taxation which is obligatory on Parties to the convention.

In 2017, the government drastically reduced taxes on cigarette products which resulted in increase in cigarette production of 72 percent and revenue increase of only 4.5 percent over the corresponding year. This means either new smokers joined the existing ones over the years or the existing ones increased their consumption to consume this 72 percent increase. Another contentious issue is that the anti-tobacco campaigners claim illicit trade is not more than 17 percent of the total trade whereas the cigarette industry claims it is around 40 to 50 percent or so. Both produce different studies to support their respective claims.

In this scenario, it is not surprising at all that cigarette prices in the Pakistani market are the lowest not only in our region but among the lowest in the world as well. The industry does give huge taxes but this should not mean that the lives of people be put at risk and young people attracted to join the pool of existing ones. Instead of giving tax relief on this ground, the state must strengthen its machinery to check illicit trade and make the tobacco industry, from the raw material procurement to the sale of finished product, comply with the rules.

The writer is a staffer at The News.

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