ISLAMABAD: A technical working group on tobacco has urged the government to increase excise duty on cigarettes by 75 percent in the upcoming budget.
The group, which is part of an effort to raise the public health and has members from the World Bank, World Health Organisation, the Tobacco Cell at the Health Ministry, Bloomberg partners and the Federal Bureau of Revenue, has recommended that the Finance Ministry should increase the excise duty on cigarette packs that fall under the lower slab from the current level of Rs 33 to Rs 44.
Duties on cigarette packs are divided into two slabs or categories, which are determined by the price of the cigarettes. Packs which cost Rs 88 or less fall under the ‘lower slab’, while those which cost more than Rs 88 fall under the ‘higher slab’.
Officials say that 80 percent of all cigarette brands fall under the lower slab. Increasing tax on these brands would render them out of reach of lower income groups, especially youngsters (under-aged smokers).
The group had made similar recommendations last year as well when the duty was enhanced from Rs 28.40 to Rs 32.98. The duty on higher slabs currently stands at Rs 74.10, which will be increased according to the inflation rate.
It has also been discovered that multinational tobacco companies had proposed to the FBR for introduction of a third slab, which is expected to give tax relief to cigarette packs in the middle bracket.
The proposal has been submitted as a suggestion to curb cigarette smuggling in Pakistan. Talks are being held in the FBR for consideration of this proposal. However, if accepted, this slab will go completely against the recommendations of the working group.
This new slab is expected to only increase the sales volume of multinational tobacco, while at the same time it will increase cigarette consumption by many folds among the Pakistani youth. It is imperative that such a proposal be rejected immediately.
Apart from increasing the excise duty, the group has also recommended removing all exemptions on tobacco for certain branches of the government.
Pakistan had signed a Framework Convention on Tobacco Control (FCTC) in 2004. Under Article 6 of the FCTC, Pakistan has to implement a tax and introduce price policies on tobacco products as part of measures to reduce tobacco consumption.
Tobacco taxes translate into price increase, and are considered among the single-most effective options for reducing tobacco use and increase revenues. Higher tobacco taxes save money by reducing tobacco-related healthcare costs, including medical expenses.
According to a study on tobacco taxation in Pakistan, which was jointly conducted by the FBR, World Bank, University of Toronto, Johns Hopkins University, University of Illinois at Chicago and Beaconhouse National University, a uniform specific excise tax of Rs 44 per pack of 20 cigarettes could reduce the number of smokers in the country by 13.2 percent, increase tax revenues by Rs 39.5 billion, and lead to a reduction of 0.65 million premature deaths that are caused by smoking every year.