Smoky Af­fairs

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The fight against the use of to­bacco prod­ucts is pick­ing up pace around the world and there is hardly any dis­agree­ment over the fact that it is ex­tremely haz­ardous to hu­man health and a ma­jor cause of death.

Pak­istan is among the coun­tries that have made strong com­mit­ments to bring to­bacco con­sump­tion down through dif­fer­ent mea­sures. For ex­am­ple, ad­ver­tis­ing of to­bacco prod­ucts is strongly reg­u­lated and there are laws which pro­hibit their pro­mo­tion through place­ment of ad­ver­tise­ments in news­pa­pers, mag­a­zines, TV chan­nels, ra­dio trans­mis­sions, etc.

The re­tail out­lets have also come un­der the scan­ner as cig­a­rette com­pa­nies want them to work as their mar­keters as well. Lo­cated across the lengths and breadths of the coun­try these out­lets are present in the form of kiosks, gro­cery shops, con­ve­nience stores, supermarkets, shops at petrol pumps and so on. The gov­ern­ment has banned hoist­ing of ban­ners, posters, bill­boards, etc. at these points of sale to re­duce the trend of smok­ing among coun­try­men.

This is im­por­tant be­cause the cig­a­rette com­pa­nies fo­cus on these out­lets and even de­sign their planograms. There are re­ports that out­lets are de­signed or ap­proved by cig­a­rette com­pa­nies who pro­vide racks and or­gan­ised gro­cery dis­pensers to the re­tail­ers. These com­pa­nies also cover the cost of set­ting up racks and dec­o­rat­ing in­te­rior and also pay the elec­tric­ity bills for the units con­sumed by sign­boards, etc. But this is not the case now as out­door ad­ver­tis­ing has been strictly banned. Other mea­sures taken in this re­gard also in­clude plac­ing pic­to­rial warn­ing on cig­a­rette packs.

How­ever, it is be­lieved that to­bacco taxes are the most ef­fec­tive but the least-used to­bacco con­trol tool. The point here is that a suf­fi­ciently large tax in­crease will raise to­bacco prod­uct prices, make them less af­ford­able and drive down to­bacco con­sump­tion among masses.

Pak­istan has over the years in­creased taxes on cig­a­rettes which re­sulted in a steep fall in their pro­duc­tion and con­sump­tion, es­pe­cially in 2017. But what hap­pened last year (2017-2018) was that the Fed­eral Board of Rev­enue (FBR) re­vised the tax regime and re­duced taxes on cig­a­rettes that pushed their pro­duc­tion up­wards. The rea­son given was that the high taxes on cig­a­rettes had re­sulted in their smug­gling into Pak­istan, abrupt rise in sale of non-cus­tom paid cig­a­rettes, in­crease in il­licit cig­a­rettes trade, eva­sion of taxes and rev­enue down­fall.

But there are oth­ers who con­test these ex­cuses and say that the fail­ure of the FBR ma­chin­ery to curb

smug­gling and il­licit cig­a­rettes trade must not be made the ba­sis for fa­cil­i­tat­ing cig­a­rette man­u­fac­tur­ers and pro­mo­tion of smok­ing through tax con­ces­sions. They also as­sert that the figure about il­licit cig­a­rette trade quoted by the in­dus­try and its lob­by­ists is ex­ag­ger­ated and claim it is hardly 10 per­cent and not 40 per­cent of the to­tal mar­ket vol­ume.

A re­cent study ti­tled “Study to As­sess the Vol­ume of Il­licit Cig­a­rette Brands,” con­ducted by the Pak­istan Na­tional Hearts As­so­ci­a­tion (PANAH) in col­lab­o­ra­tion with the Hu­man Devel­op­ment Foun­da­tion (HDF) has pointed out that the figure is hardly around nine per­cent of the to­tal vol­ume of cig­a­rettes con­sumed in the coun­try.

So the ques­tion here is that with the an­nual bud­get an­nounce­ment round the cor­ner, should the gov­ern­ment do away with the tax con­ces­sions to the cig­a­rette in­dus­try and ef­fec­tively dis­cour­age smok­ing or let them stay there. If we go by the stance of the Min­istry of Na­tional Health Ser­vices (MNHS), the de­sired action on part of the FBR is to with­draw tax con­ces­sions.

The min­istry had pro­posed prior to the 2017-2018 fed­eral bud­get that the tax on the lower slab of all brands of cig­a­rettes should be Rs44 per pack of 20 cig­a­rettes. There was a higher slab as well in this two-tier tax regime for cig­a­rettes.

This pro­posal made by the min­istry was based on a re­search study on to­bacco tax­a­tion in Pak­istan jointly con­ducted by the FBR, the World Bank, Univer­sity of Toronto, Univer­sity of Illi­nois at Chicago and the Bea­con­house Na­tional Univer­sity.

Ac­cord­ing to the study, a uni­form spe­cific ex­cise tax that ac­counts for Rs44 per pack of 20 cig­a­rettes could re­duce the num­ber of smok­ers by 13.2 per­cent, in­crease rev­enue by Rs39.5 bil­lion lead­ing to re­duc­tion of 0.65 mil­lion pre­ma­ture deaths caused by smok­ing among cur­rent smok­ers, while also pre­vent­ing 2.5 mil­lion youth from tak­ing up smok­ing. The FBR was also asked to take en­force­ment mea­sures to curb il­licit trade in to­bacco pro­duc­ers. But on the con­trary, the FBR in­tro­duced a third tier where cig­a­rettes could re­tail be­low Rs58 per pack and the ex­cise duty would be Rs16 per pack. The com­pa­nies made best use of this of­fer and brought down the price slightly down to fall in this bracket.

The min­istry last year in­ti­mated the fi­nance di­vi­sion to in­crease the tax­a­tion on to­bacco in­dus­try as Pak­istan is sig­na­tory of the World Health Or­ga­ni­za­tion (WHO) Frame­work Con­ven­tion on To­bacco Con­trol (FCTC). It is also a com­mit­ment un­der the con­ven­tion to in­crease taxes on to­bacco prod­ucts to make them out of reach of con­sumers. It has been pre­dicted that mak­ing cig­a­rettes four times more costly in all coun­tries glob­ally by 2025 would re­duce the world’s to­bacco use preva­lence from the cur­rent 21 per­cent to 15 per­cent in 2025 which is a tar­get set by WHO as well.

Hav­ing said this, one can in­sist that the of­fi­cial and ir­refutable sta­tis­tics shall form the ba­sis of fu­ture poli­cies rather than the spec­u­la­tions or es­ti­mated data with­out any em­pir­i­cal ev­i­dence. The fact that the pro­duc­tion of cig­a­rettes al­most dou­bled dur­ing the quar­ter fol­low­ing the in­tro­duc­tion of this thirdtier points out where we are head­ing. These fig­ures were cited by none other than the State Bank of Pak­istan (SBP). Even more alarm­ing is the fact that the growth in cig­a­rettes’ pro­duc­tion went up by 131 per­cent in Jan­uary 2018 as com­pared to the same month in the pre­ced­ing years.

So, why should the FBR not be held di­rectly ac­count­able for its fail­ure to curb smug­gling, check il­licit trade and achieve rev­enue tar­gets in­stead of giv­ing them the power to take steps against the spirit of the in­ter­na­tional con­ven­tion the gov­ern­ment has signed and rat­i­fied? The an­swer must come now and the best way is to in­cor­po­rate it into the bud­get doc­u­ment un­der prepa­ra­tion.

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