Daily Times

Expressing dismay over Health Ministry’s compromise on health tax in lieu of abolishing third tier from cigarettes tax, the Network for Consumer Protection said on Wednesday that tobacco control was back to where it was three years ago in 2016-17.

“Earlier, the Ministry of National Health Services, Regulations (NHSRC) had claimed to have got approval from the federal cabinet for imposing health tax on cigarettes and carbonated drinks and the revenue generated will be spent on health. But budget proposal did not mention it. Even World Health Organization’s (WHO) Regional Director Dr Ahmed Al-Mandhari’s congratulation to Pakistan government on health tax went up in smoke,” the Network CEO Nadeem Iqbal said in a statement.

“Instead of getting a health levy, NHRSC lost the budgetary allocations by almost 50% from previous year’s budget of Rs 25 billion, of which it could only realize around Rs 8 billion after cut in Public Sector Development Programme (PSDP).”

“On anti-smoking, the NHRSC had to eat humble pie as the most consumed cigarettes brand remain cheaper and accessible to the bulging youth of the country. The 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 the 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,” he said.

“Therefore, Federal Excise duty remains a tax that is imposed to reduce the consumption of hazardous items. In addition, the target of tax collection from cigarettes of Rs 147 billion seems very ambitious as last year government could not even achieve the target of Rs 114 billion,” Nadeem added.

“In the budget proposal 2019-20, the government has increased prices of cigarettes by raising FED from PKR 90 to 104 per pack of 20 cigarettes on upper tier (low consumed) and adjusted PKR 33 for 2nd tier (highly consumed) by removing 3rd tier that was introduced in 2017-18.”

“In 2017-18 when 3rd tier was introduced, almost 80% of the most sold brands were falling in 3rd tier and their price was reduced by 50% and average FED ratio declined from 57.5% to less than 45%.”

“In 2016-17, FED collection has seen a sharp decline from Rs 90 billion in 2015-16 to Rs 66 billion in 2016-17 and further decreased to Rs 65 billion in 2017-18. This the multinational tobacco companies contributed to higher incidence of counterfeit cigarettes.”

“No doubt that two tier tax system brings better revenues. As in 2012/13, the first year when the two tiers were introduced the FED collection was increased from Rs 16.1 billion in 2012-13 to Rs 90.4 billion in 2015-16.”

“Proposed FED rate that would collect Rs 147 billion in revenue, the overall prices of cigarettes would increase by Rs 10 to 14 raising the FED ration by around 60% on a cigarette pack which will remain much lower from the WHO recommendations of minimum 75% of a cigarette pack. However, the average FED ratio in 2016-17 was roughly position 57%.”

“The WHO Framework Convention on Tobacco Control (FCTC) Article 6 calls for price and tax measures to reduce the demand for tobacco. Pakistan has signed in 2004 and ratified in 2005. Guidelines of the article 6 of the FCTC call for measures to increase taxes on tobacco products (at least 75% of retail price). Guidelines of the article 6 of the FCTC requires the development, implementation and enforcement of tobacco tax and price policies as part of public health policies should be protected from commercial and other vested interests of the tobacco industry including tactics of using the issue of smuggling in hindering implementation of tax and price policies. Although, Pakistan has signed protocol on illicit trade in tobacco products but action plan has not been introduced to curb illicit trade of tobacco products,” the CEO said in the statement.