Cigarettes: experts recommend single-tier tax structure
To effectively check cigarette consumption in Pakistan, experts and health advocates have strongly recommended a single-tier tax structure on cigarettes in the coming budget (2024-25).
Health activists have supported the International Monetary Fund’s (IMF) stance, emphasizing the urgent need for a revamp of tobacco taxation policies in Pakistan.
According to the IMF’s Technical Assistance Report titled “Pakistan Tax Policy Diagnostic and Reform Options,” released in February, the consumption of cigarettes in Pakistan has witnessed a notable decline of 20-25 percent following substantial hike in prices of tobacco products.
Experts stated that the findings of decline in consumption due to high taxes stressed the need for aligning the tax with the guidelines set by the World Health Organization (WHO).
They have called upon the government to transition to a Single Tier Tobacco Taxation System and eliminate the existing dual-tier system for both local and imported cigarettes.
The IMF’s advocacy for increased taxation on tobacco products not only seeks to curb cigarette consumption but also aims to bolster government revenue.
By implementing uniform excise rates and bridging the gap between local and foreign cigarette manufacturers, Pakistan stands to streamline its taxation system and mitigate the healthcare costs associated with tobacco-related illnesses.
The seventh-largest tobacco-consuming country globally, Pakistan signed the Framework Convention for Tobacco Control (FCTC) in 2004 to address and regulate tobacco use.
The World Health Organization (WHO) underscores the importance of robust tax measures in reducing tobacco consumption, particularly in low- and middle-income countries, by elevating tobacco prices.
However, the cigarette industry has persistently opposed tax hikes, disregarding the health consequences associated with the affordability of cigarettes, they added.
Health activists on Tuesday emphasised the critical need for the government to prioritize health and economic agendas by increasing taxes on cigarettes.
This call comes in tandem with the imminent commencement of negotiations on the International Monetary Fund (IMF) Agreement and the crucial Budget Planning for 2024-25.
During an event organised by the Society for the Protection of the Rights of the Child (SPARC) on Tuesday, Malik Imran Ahmad, Country Head of CTFK, emphasised the interconnected relationship between reduced tobacco consumption, improved health outcomes, and enhanced revenue streams.
He affirmed that prioritizing tobacco taxation in the forthcoming budget would not only safeguard public health but also propel the nation towards achieving its fiscal targets and commitments.
To propel health and economy forward, Ahmad advocated for a 26.6% Federal Excise Duty (FED) increase on cigarettes, a move projected to recuperate 19.8% of healthcare expenditures associated with smoking-related diseases. He emphasised that this measure aligns with the impending IMF Agreement negotiations, contributing substantially to revenue generation crucial for budgetary allocations.
Ahmad further highlighted that the government would benefit from increased revenue from tobacco products, potentially averting the need for an increase in petrol prices and subsequent rises in commodity prices. This strategic approach would provide much-needed relief to the public amidst economic challenges.