PM Imran approves increase in taxes on cigarettes

Also gives go-ahead for 1% health tax on all beverages to boost revenues

ISLAMABAD: Prime Minister Imran Khan has approved a plan to increase taxes on the cigarette manufacturing industry in the upcoming budget for 2019-20 in a bid to enhance revenue collection and discourage its use.

Chairing a cabinet meeting on Tuesday, PM Imran also decided to end the tax-free cigarette facility for the prime minister, chief ministers and governors of all provinces to control the use of tobacco. Officials told The Express Tribune that the prime minister, chief ministers and governors would now pay the same taxes as other consumers. The prime minister also gave the go-ahead for imposing health tax of Rs10 per pack of cigarette and earnings from that would be used by the health ministry on welfare projects.

It was decided that 1% health tax would be imposed on all beverages in the upcoming budget.

In February this year, the National Health Services and Coordination Division presented a draft of the Health Levy Bill 2019, proposing imposition of a health levy on cigarettes and sugary beverages. However, the Federal Board of Revenue (FBR) opposed the levy on the cigarette manufacturing industry.

The Finance Division, on the other hand, agreed to impose the tax on cigarettes.

The Cabinet Division argued that imposition of any tax fell within the meaning of money bill as provided in Article 73(2)(a) of the constitution. A money bill is moved in the National Assembly after seeking approval of the cabinet in accordance with Rule 16(1)(a) and (d) of the Rules of Business 1973.

“Now, the prime minister has decided to impose this health tax on cigarettes and beverages in the upcoming budget,” revealed an official who attended the cabinet meeting, adding that the health ministry would send a proposal to the finance ministry to make the tax part of the Finance Bill 2019.

In the meeting, the PM also gave approval for rolling back the third slab of federal excise duty introduced by the Pakistan Muslim League-Nawaz (PML-N) government, which brought down the duty and led to a reduction of billions of rupees in revenue collection, stated officials.

A Senate special committee, in its report, recommended the withdrawal of the third slab of federal excise duty. After introduction of the slab, the tax collection from cigarette manufacturers dropped to Rs74 billion.

The committee was of the view that revenues could jump to Rs120 billion after withdrawing the third duty slab.On May 23, 2018, the Public Accounts Committee recommended a special audit by the Auditor General of Pakistan (AGP) to find reasons behind the significant drop in tax collection from the cigarette manufacturing industry.

An AGP report and recommendations of the special parliamentary panel clearly pointed to lobbying by big companies and introduction of the third duty slab as reasons for the decline in revenues.

Prime Minister’s Focal Person on Tobacco Control Babar Atta said the prime minister had taken the lead in the initiative and stated that no one would be allowed to play with the health of people.

He said the health minister would send an approved plan to the finance ministry within the next two days to make it part of the Financial Bill 2019.



Published in The Express Tribune, May 30^th, 2019.

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