Additional Rs19 billion tax revenue through 30 percent FED on cigarettes

ISLAMABAD: The government can generate at least Rs19 billion in additional tax revenue if the federal excise duty on cigarettes is increased by 30 percent, a group of anti-tobacco activists said on Friday.

The activists have formally submitted this proposal to the Ministry of National Health Services and Regulations and urged the government to include these proposals in the upcoming budget.

In the 2-page written proposals, they suggested the government to raise tobacco excise to Rs43 on the low-price tier and Rs135 on the premium tier that would result in 219,000 fewer smokers; 3.8 percent reduction in smoking prevalence among adults; 6.4 percent reduction in smoking intensity among adults.

They said the proposed tax scheme would also help save at least 76,800 lives and Rs19 billion in additional total tax revenue—an increase of at least 14.4 percent from the existing tax collection.

The document shared by the anti-tobacco activists said that tobacco taxes in Pakistan were low and cigarettes were cheap.

The average excise tax share is 45.4 percent of the retail price, much lower than the WHO recommendation that excise tax be at least 70 percent of the retail price, the document said.

It said the cigarette prices in Pakistan are among the lowest in the world, and the effective excise tax rate on cigarettes in 2020-21 is still the same as it was in 2016-17.

The cigarettes in Pakistan became more affordable in 2020-21 from a combination of no change in the federal excise tax and increases in nominal income and inflation. Pakistan is ranked among the worst-performing countries in the Tobacconomics Cigarette Tax Scorecard with a score of less than one on a five-point scale.

The document said that more than 400,000 people are estimated to start smoking in 2020-21.

The anti-tobacco activists said the tobacco use in Pakistan was deadly as around 30 million adults (age 15 +) or about 19.1 percent of adults currently use tobacco.

The tobacco use is the leading cause of deaths due to non-communicable diseases (NCDs), including cancers, chronic respiratory diseases, and cardiovascular diseases.

In 2017, tobacco use killed an estimated 163,360 people. The poor households spend more of their budget on tobacco as compared to rich households in Pakistan, which leads to reduced spending on basic needs, they added.

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