Islamabad, (Parliament Times) : Introduction of Sin Tax Reform Law in 2012 in Philippine resulted in three million less smokers in 2015 with biggest decline in poorest households and with incremental ear marking the country’s health budget tripled in 2019 from 27PhP to 93PhP with significant increase from PhP32bn to 106bn in tobacco tax revenues, reiterated by Dr Zafar Mirza at High Level policy Dialogue organized by Social Protection Resource Centre (SPRC)Islamabad, on 3rd June 2022 at serena Islamabad. SPRC is a think tank dedicated to the universalization of social protection in Pakistan. This dialogue brought together senior policymakers and opinion leaders from Government, FBR, Tax experts, National Institute of Health, Pakistan Institute of Medical Sciences , Health Services Academy, PIDE, Public Health, CTFK Partners and civil society and media representatives. Consensus was developed on practical and doable recommendations to balance the revenue, employment, and health considerations in case of taxation on cigarettes.
Executive Director, SPRC, Dr. Razia Safdar commenced the session by highlighting the established harms of Tobacco use and it s wider socioeconomic impacts. She mentioned about out 182 FCTC parties only 38 countries worldwide Pakistan included, are working to reduce demand side along with other measures.
Mr. Malik Imran Ahmed, Country Head for the Campaign for Tobacco-Free Kids (CTFK) set the scene by quoting the recent ‘Tobacco Fact Sheet 2022 for Pakistan’ which analyzed and argued that since FED on cigarettes has not increased since July 2019, adjusting for inflation and income, cigarettes have become more affordable today. The sheet, he said, has also ‘made a budget proposal to increase FED from Rs33 to Rs42.9 on inexpensive cigarettes and from Rs104 to Rs135.2 on the high price tier’. He quoted that 615 billion rupees are health costs of smoking related diseases while tax collected from industry in last year is only 134 billion rupees He added that it is imperative to enhance tobacco taxes since more than 60 % of our population is under 25 years of age and it is necessary to preserve their health and productivity for the future.
Former Special Assistant to the Prime Minister on health, Dr. Zafar Mirza Key note speaker ,reminded the participants that, smoking rates are going up in Pakistan, most disturbingly among children and women. He showed his concern over the progress and legitimacy of tobacco industry. He highlighted about positive achievements like ban on advertisement is implemented effectively but on taxation side from 45 % to 70% benchmark there is still a big gap which needs to be filled at once and Now. why Now because this is the time when the Government can use cigarette tax enhancement in their negotiations with the IMF, in view of our fiscal problems. He added that analyses show that increasing tobacco prices by 10% decreases tobacco consumption by about 5%. He advocated that the current government take the health levy and the health contribution bill forward which can result in addition of billions to spend on health and increase in tax revenues. He appreciated the progress SPRC has made over two years working towards wellbeing of vulnerable populations like old age , disability and Social protection during Covid 19.
Former Tax Commissioner, Mr. Jehanzeb Mahmood highlighted the need of a robust Track and trace system to monitor the supply chain of the Tobacco industry. He added that the FBR needs support and capacity building to strengthen their enforcement measures. He also suggested the creation of a redemption fund on all Tobacco Industries on account of the serious harms caused by tobacco use.
Mr. Tariq Iqbal Burki, Secretary Law and Clarification, Federal Board of Revenue, commented about the taxation regime and how taxes are imposed on different forms of tobacco. He added that there is a 17% sales tax on unmanufactured tobacco and the FED is 10 Rs/kg. Apart from the local production other elements such as e-liquids(electric cigarette kits) are also under taxation with 17% sales tax and FED of Rs10/ml. Regarding Tobacco tax collection for the last few years, he added that in 2016 FBR collected Rs 114 billion. In 2017 two slabs were enhanced to three slabs and due to this a reduction is observed in taxes and FBR only collected Rs 83 billion. While in 2018 they collected Rs 87 billion and in 2019 it increased to Rs 113 billion and in 2021, Rs 134 billion were collected including sales tax and FED and for the current year target is Rs 160 billion. In the overall taxation target for this year, the contribution of tobacco is very small which is near 2.6% of total tax collection. He also stressed that political will is inevitable for change in taxation. He invited recommendations for taxation on tobacco to be considered as the budget is being formulated.
Honorable Dr Rizwan Taj renowned psychiatrist highlighted the mental health issues related to smoking directly and indirectly. He was concerned about Cigarettes being used as a vehicle for other addictive substances which is alarming in youth.
The stakeholders made actionable policy recommendations for the upcoming budget. These included setting the FED on cigarettes at 70% in real terms, i-e adjusted for inflation and implementation of a single tax tier. Additionally, they strongly recommended that this revenue be earmarked for public health measures to counter tobacco harms. Legislation and regulation for inclusion of smokeless Tobacco which are risk of deadly cancers.
Tobacco use is undoubtedly dangerous and leads to serious diseases such as Heart disease, Chronic Obstructive Pulmonary Disease and Lung Cancers. Despite being a damaging product, tobacco continues to be a legitimate product, being protected by laws. Raising prices through taxation is the most effective way to reduce tobacco use. Yet, only 13% of the world’s population is protected by these taxes at the WHO FCTC’s best-practice level. At the current average Federal Excise Tax (FED) share of 44.7% of retail price of cigarettes, Pakistan has a long way till the prescribed benchmark of 70% is reached. Raising these taxes now presents a clear win-win-win that will help our government in improving population health, reducing associated healthcare costs, and increasing tax revenue that can pay our debts.
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