Heath activists unveil tobacco industry’s tax dodging tactics

Lahore: The health activists at the event organized by the Society for the Protection of the Rights of the Child (SPARC) and the Social Policy and Development Centre (SPDC) on Thursday highlighted deceptive tactics used by the tobacco industry to evade taxes, causing significant losses to the national treasury.

 They presented official statistics of cigarette production in Pakistan, revealing a pattern of reduced production during periods of potential tax increases. This suggested that the tobacco industry manipulated production figures to influence policymakers.

Muhammad Sabir, the Principal Economist of SPDC, pointed out that alongside tax rate increases, cigarette prices also rose. The prices of popular economy and premium brands increased significantly, with an overall price increase of 164% and 170%, respectively.

 Additionally, cigarette manufacturers continued to raise their net-of-tax prices, particularly for economy brands, which increased by 121%—well above the current inflation rate. The tax burden on economy brands also increased, resulting in a higher consumer price. However, despite these increases, the excise tax share in the retail price remained lower than the recommended standard of 70%.

Malik Imran, the Country head of Campaign for Tobacco-Free Kids (CTFK), highlighted the tobacco industry's attempts to undermine government efforts to reduce tobacco-related harm. Imran stated that the industry often exaggerates the issue of illicit trade as an excuse, while engaging in underreporting actual production figures to evade taxes. Cigarette manufacturers also shift the tax burden onto consumers to boost their profits. Imran provided an example where official production significantly dropped in July 2022 compared to the previous month, resulting in increased tax revenue for the government. Therefore, he emphasized the importance of maintaining the policy of raising tax rates to counter these deceptive practices.

Khalil Ahmed Dogar, the Program Manager of SPARC, emphasized that tobacco was causing a pandemic, resulting in the death of 465 people and addiction in 1200 children every day. He commended the government's decision to raise tobacco prices as a necessary step in tobacco control efforts. Dogar mentioned that this decision has already benefited the economy and would generate more revenue while reducing the burden on public health. However, he warned the government against falling for the tobacco industry's false campaign and urged them to remain firm in their commitment to addressing the issue.

The health activists cautioned the government about the deceptive tactics employed by the tobacco industry to evade taxes, leading to significant losses for the national treasury. They presented evidence of manipulated production figures and the burden of increased prices on consumers. The activists urged the government to maintain its policy of raising tax rates to counter these practices and emphasized the importance of bold tobacco control efforts to address the health and economic burdens caused by tobacco use.