PTI govt asked to increase tax rate on cigarettes

Think tank believes tax reforms will generate extra revenue of Rs206b

ISLAMABAD: A think tank has urged the government to increase the rate of tax on cigarette manufacturers in the upcoming budget for fiscal year 2019-20.

After the introduction of a third tier of excise duty by the previous PML-N government, around 160 billion cigarette sticks were produced between May 2017 and March 2019 in Pakistan. The revenue loss following the announcement of the lower duty tier was estimated at Rs77.85 billion between 2016 and 2019.

The think tank, Society for the Protection of the Rights of Child (Sparc), in a pre-budget seminar held on Saturday, shared proposals for tobacco tax reforms and recommended solutions to the federal government on a short-term (covering fiscal years 2019/20), medium term (FY20/21) and long-term (FY21/22) basis.

In its calculations, the think tank predicted that tax reforms will generate a significant additional tax revenue of about Rs205.9 billion over three years, equivalent to average annual increase in total tax revenue of about 51% or about Rs32.3 billion.



It also anticipated an increase in the share of excise duty in cigarette prices from about existing 45.9% to 57.6%, closer to the 70% level recommended by WHO. Speakers at the seminar expressed confidence that recommendations for tobacco tax reforms, if adopted by the government, would lead to the framing of an effective policy, which would simplify Pakistan’s tobacco tax system. Thus, it would also help reduce government’s administrative costs, improve enforcement and compliance, and further align it with best global practices, they said.

Furthermore, according to the speakers, the proposed tax increase can significantly reduce tobacco use and save lives while raising significant additional tax revenues, which can fund government’s health programmes, including for tobacco control.

Malik Imran of the Campaign for Tobacco Free Kids said the tax reforms would contribute to almost 42% reduction in adult cigarette consumption. Sparc Executive Director Sajjad Ahmad Cheema said almost 90% of all brands were taxed as “low tier” under the tax system introduced in FY17. 

Published in The Express Tribune, April 28^th, 2019.

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