Finance Minister Asad Umar announced an increase in taxes on cigarettes, “expensive” phones and other luxury items while reading out federal budget amendments during the National Assembly’s session on Tuesday.
Umar said taxes would be increased on items used by the rich and specified that the duty on cars with 1800cc engine capacity has increased to 20 per cent.
The previous government had been working on a proposal to increase cigarette taxation earlier in April after the health ministry proposed the addition to discouraging tobacco consumption.
Sources told The Express Tribune in April that the Finance Division had realised that it had made a mistake by reducing the excise duty on cigarettes and now it wanted to withdraw the incentive.
In a letter sent to the FBR, the Ministry of Health recalled that prior to the FY18 budget, it had proposed a tax of Rs44 per pack on the lower slab of all cigarette brands to counter health risks and boost revenue.
According to a study, a uniform excise duty of Rs44 per pack of 20 cigarettes could reduce the number of smokers by 13.2%, increase tax revenue by Rs39.5 billion, reduce by 0.65 million the premature deaths caused by smoking and prevent 2.55 million youth from starting smoking.
Apart from these, the tax measure will help curb the illicit trade in tobacco products.
However, in the Finance Act 2017, the ministry’s suggestion was turned down and the government inserted a new tax slab with a reduced excise duty of Rs16 per pack which did not only boost cigarette production but also pushed down revenue collection.
Cigarette production, according to statistics of the State Bank of Pakistan, swelled 71% from 11.48 billion sticks to 19.66 billion sticks in July-October 2017.