FED increase on cigarette a must to check rising consumption

Islamabad:  Snowballing economic burden in terms of public health and economic costs due to rising cigarette consumption has prompted health experts to demand implementation of World Bank’s recommendation for increase in Federal Excise Duty (FED) on cigarettes.

“Increasing FED on cigarettes will check the steady rise in consumption and ensure a healthier future for Pakistan’s youth,” said Amjad Qamar, Director Center for Research and Dialogue (CRD).

 Qamar said that Pakistan is one of the largest tobacco-consuming countries and low prices of cigarettes was the major contributor in the respect. “Cigarettes are more affordable in Pakistan than the rest of the region,” he said.

Taxation policies of the successive governments have failed to generate revenue as well as to curb the alarmingly high smoking rate due to policies that are often manipulated by industry giants, particularly the multinational companies.

The country, according to Federal Board of Revenue (FBR) yearbooks, has lost Rs 567 billion revenue during the last seven years.

On the other hand, a study conducted by the Pakistan Institute of Development Economics (PIDE) pointed out that the cost of smoking-related diseases and deaths was Rs 615.07 billion ($3.85 billion) in 2019, amounting to 1.6% of the GDP.

Malik Imran Ahmed, Country Director, Campaign for Tobacco Free Kids (CTFK) referred to World Banks report titled 'Pakistan Development Update,' and said that a significant revenue gain of 0.4 percent of GDP (PKR 505.26 Billion) could be achieved by applying the current rate on premium cigarettes (Rs. 16.50 per cigarette) to standard cigarettes as well.

The report underscores the potential for economic and health benefits through this measure.

Imran added that aligning cigarette taxation with the World Bank's recommendation is a crucial step toward safeguarding the health and well-being of Pakistan's children.

Higher excise duty on cigarettes not only deters smoking but also generates much-needed revenue for essential public services, he said.

Earlier, International Monetary Fund (IMF) has also recommended Pakistan to overhaul tax machinery and to tax non-essential items including cigarettes to boost revenue and improve public health.

The global lender has recommended the government to introduce single tier tax structure alongside a significant increase in taxes on tobacco products.

According to the IMF's Technical Assistance Report titled "Pakistan Tax Policy Diagnostic and Reform Options," released in February, the consumption of cigarettes in Pakistan has witnessed a notable decline of 20-25 percent following substantial hikes in taxes on tobacco products.