Reforms urged in cigarettes manufacturing sector with least contribution in economy

Islamabad:  The researchers on Tuesday said that reforms in cigarettes manufacturing sector having minimum contribution of the economy of the country is need of the hour.

They supported International Monitory Fund’s (IMF) emphasizing on the need to limit tax incentives to cases where their economic benefits, such as employment generation and value addition to the economy, outweigh the costs to the budget.

This was a meaningful proposal as Pakistan seeks a new bailout package ranging from $6 to $8 billion under the Extended Fund Facility (EFF).

Capital Calling, an Islamabad-based think tank, has pointed out that cigarette manufacturing was one of the messiest sectors where tax reforms are needed at the earliest.

Speaking at discussion by a group of researchers, Dr. Hassan Shehzad, from International Islamic University Islamabad (IIUI), commented that cigarette manufacturing industry’s contribution to employment generation or value addition to the economy was negligible.

On the other hand, it accounts for “over 163,600 people each year in Pakistan. Almost 31,000 of these deaths are due to exposure to second-hand smoke. Tobacco causes about 16.0% of all male deaths and 4.9% of female deaths. Overall, 10.9% of all deaths are caused by tobacco.”

Dr Muhammad Zaman, head of Zaman Research Centre (ZRC), Quaid-i-Azam University (QAU), said that there was evidence that consumption of tobacco declines when its price increases as it goes out of the reach of many users.

“Higher taxes on tobacco could reduce consumption in South Asia by at least one-third and avoid 35-45 million premature deaths, concludes an analysis published today in The British Medical Journal,” said Dr Zaman, quoting a research report.

He said that IMF recommendations for uniformed tax on cigarettes, regardless of their local or foreign brands, was praiseworthy and should be implemented forthwith. He said that cigarette companies have been trying to build media narrative against higher taxes on Tobacco, which was amusing as cigarettes prices were the lowest in Pakistan comparing it to our region.

Dr. Zaman said, “The point is that no amount of verbatim can change the fact that cigarette is injurious to health and that Pakistan has become a haven for cigarette makers because of the flaws in the tax system, many of whom have been pointed out by the IMF. The flaws have to be ironed out of the system. The sooner, the better.”