Record tobacco tax haul

Tobacco-related illnesses are estimated to cost the country Rs620 billion a year, cause over 337,000 deaths per year

Tobacco tax revenues are expected to cross Rs200 billion for the first time this year on the back of a recent tax hike, and it appears the high tax burden is getting to smokers. However, unlike most countries that dedicate most if not all of their vice tax revenues to remedial efforts for combating those vices and towards social uplift, our government action remains purely punitive.

Still, the dual impact of high inflation and even higher tobacco prices has apparently led to a small decrease in smoking — one per cent of former smokers say high cigarette prices are the main reason they quit, according to a recent report. Indeed, the cost of cigarettes has gotten to the point where heavy smokers who quit can now dedicate a reasonably large amount of additional funds to pay for food and other household expenses that were entering a prohibitive price territory. Hopefully, these people will not be tempted to restart smoking if their financial situations improve.

It is also worth noting that the total tax revenue is dwarfed by the economic toll of tobacco use. Tobacco-related illnesses are estimated to cost the country over Rs620 billion a year and still cause over 337,000 deaths every year. Tobacco products — cigarettes in particular — are also illustrative of the broader problems in Pakistan Customs and other bodies that monitor smuggling, counterfeiting, and other forms of illicit sales. The big multinational manufacturers claim that over 40% of cigarettes sold in the country are illicit. Pakistan Customs disputes this, saying ‘only’ 18% are illicit.

But even 18% of any product being smuggled is far too much and reflects poorly on the government. Better monitoring would lead to an additional Rs50 billion in tax revenue, which could easily cover any additional enforcement costs, while also helping reduce smoking by ensuring that the average prices of tobacco products rise significantly. Illicit domestic production, however, may be a tougher challenge, given the political strength of several allegedly illicit tobacco farmers and processors.

 

Published in The Express Tribune, May 25^th, 2023.

Like Opinion & Editorial on Facebook, follow @ETOpEd on Twitter to receive all updates on all our daily pieces.