The real sin

As the government imposes a federal health levy on cigarettes and sugar-sweetened beverages

Editorial February 23, 2019

Another good intention of the government seems to have run into a roadblock in the shape of its gross inexperience and naiveté. The government’s proposed ‘Sin Tax’ would impose a federal health levy of Rs10 on a 20-stick cigarettes pack and Re1 on 250 milliliters sugar-sweetened beverage. The money generated by this measure was to be used for funding the expensive health schemes of the government, including its massive health insurance scheme and a fatal disease scheme. But it has yet to sail through the federal cabinet.

The finance minister has pointed out how individual ministries cannot propose new taxes, with the rules of business dictating that such measures must be routed through the Revenue Division. Furthermore, imposing a levy instead of a tax means that the revenue generated does not become a part of the federal divisible pool being shared by the provinces and the Centre.

There were concerns that the provinces may raise constitutional objections to collect a levy on health, which is a provincial matter under the 1973 Constitution, according to officials. And any levy imposed could be potentially shot down in the courts much to the embarrassment of the government and the ultimate futility of the exercise.

Furthermore, any increase in the tax burden of the tobacco sector could lead to a reduction in its revenues, proving to be counterproductive. It was decided that the health minister would sit with the finance minister to secure financing for his projects from other sources instead of imposing a levy.

The government is well aware of the gap it faces in terms of the funds it has at its disposal and the long list of expensive welfare projects it wants to implement for the betterment of the public. But its good-intentioned projects are falling apart at the implementation stage, displaying more wishful thinking than an actual plan for achieving these ambitious targets. The government needs to fix its soft underbelly if it hopes to deliver on its electoral promises.

Published in The Express Tribune, February 23rd, 2019.

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