Budget 2015-16: Taxman sets sights on cigarette, sugar

Published: May 30, 2015
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To raise revenues, govt targets unhealthy lifestyles of Pakistanis. PHOTO COURTESY: NEW PAKISTAN

To raise revenues, govt targets unhealthy lifestyles of Pakistanis. PHOTO COURTESY: NEW PAKISTAN

ISLAMABAD: 

An unhealthy lifestyle is about to get more expensive in Pakistan: the government has decided to increase taxes on cigarettes, carbonated beverages, and even sugar in a bid to raise more revenue in the upcoming budget for fiscal 2016.

The proposals are part of the taxation measures that will be put on the table before the federal cabinet on June 5 and, once approved, will be implemented from July 1, the beginning of fiscal year 2016, said sources in the finance ministry.

The government has finalised a budget proposal to increase the federal excise duty (FED) on both categories of cigarettes by between 19% and 33% from the new fiscal year, they added. In the category where the price of a thousand cigarettes is over Rs2,706 or Rs2.70 per stick, the new tax rate is proposed at Rs3,150. The proposed rates are 19% or Rs518 higher than the prevailing tax rates.

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Do you think the govt should increase taxes on cigarettes, carbonated beverages, and even sugar in the upcoming budget for fiscal 2016?

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For the second category, having price range of less than Rs2,706 per thousand sticks, the government has proposed to increase the tax rates by one-third to Rs1,450, the sources said.

Tobacco is already considered a non-essential consumption item by the government. In the previous budget, the government had also increased the FED rate on cigarettes in the range of 13.2% to 23.3%. The government finds it easy to tax smokers due to injurious effects of the smoking on health.

A recent study by the Global Adult Tobacco Survey (GATS) reveals that about one-fifth of Pakistan’s adult population is addicted to smoking. Nearly one out of every three adult men and six out of every hundred women use tobacco in some form in Pakistan. Yet as much as Pakistanis smoke, they appear to want the government to help them quit. The same survey also found that three out of every four adults wanted taxes on tobacco increased even further.

The government is also proposing to increase FED rates on carbonated beverages by a third, from 9% to 12%, said the sources. The move is expected to generate billions of rupees in revenues for the Federal Board of Revenue (FBR).

After sustaining huge losses during fiscal 2014, which was also the first year of the Nawaz Administration, the government in the last budget had reverted to the normal tax regime for aerated waters by abolishing the fixed capacity tax regime. Under the normal regime, FED is chargeable on the concentrate at a rate of 50% of its value, while currently 9% FED and 17% sales tax is charged on carbonated beverages.

The FBR is also proposing to increase the FED rates on sugar from 8% to 17%, said the sources. However, despite the widespread prevalence of Type II diabetes in the country, and unlike the proposals on cigarettes and soft drinks, the FBR is expecting resistance to the sugar recommendation from the federal cabinet.

The government may also double FED rates on imports of edible oil from Rs1 per kilogram to Rs2 per kg. It is also considering doubling FED tax rates on oil seeds, from Rs0.40 per kilogram to Rs0.80 per kg.

Steel melters may also see a 28% increase in their tax burden on account of sales tax charged from the steel melters and re-rollers. It is proposing to increase the rate of sales tax paid by steel melters and re-rollers from Rs7 per unit of electricity to Rs9 per unit. In the last budget, the government had also brought changes in the tax structure for the steel industry. Collectively, these measures are expected to impact industrial activity and housing construction.

Published in The Express Tribune, May 30th, 2015.

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Reader Comments (8)

  • KM
    May 30, 2015 - 11:49AM

    They should double the tax on mobile phone use as well.Recommend

  • Bilour
    May 30, 2015 - 3:46PM

    Smugglers will be happy with the increase in tobacco taxes.

    It’s unlikely that the taxes on sugar will be enacted. They will face strong resistance from the ruling elite that is heavily invested in sugar mills.Recommend

  • Bilour
    May 31, 2015 - 12:41AM

    @KM:
    Mobile phone penetration rates are already very low in Pakistan compared to other countries. Taxes on that sector are very high too. Mobile phones increase labour productivity and they function as a gateway to the information super highway. It would be very bad for the economy and well being of the people to raise taxes on mobile phones.Recommend

  • Muhammad Bilal
    May 31, 2015 - 9:47PM

    Govt shouldn’t increase taxes on Sugar because it is necessity of life and every one consume limited not in excess or less amount Recommend

  • Ayaz Noorani
    Jun 1, 2015 - 9:45AM

    A Very unfair poll in my opinion. Is your paper also sponsored by the tobacco industry?

    in a single poll you have asked about cigarettes, sugar and carbonated drinks; doesn’t make any sense, only that it was done on purpose to manipulate the results. Recommend

  • Bilal Chaudhry
    Jun 3, 2015 - 9:51AM

    Increase in FED rates on sugar i.e. 8 to 17% is not justify, becuase every bakery items and in normal life almost every one consume limited not in excess or less amount. Govt must consider on it before increasing the FED rates. Recommend

  • Mahmood Raza
    Jun 5, 2015 - 9:25PM

    The govt should not increase excise duty on mobile phones because last year the excise duty was also increased. We need a Technical Pakistan in the technical world of this age. Moreover, the duty on cigrettesRecommend

  • Jul 2, 2015 - 12:51PM

    The govt should not increase excise duty on mobile phones because last year the excise duty was also increased. We need a Technical Pakistan in the technical world of this age. Moreover, the duty on cigrettes. Shortly this buddget can not faverable for poor people. Recommend

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