FED Increase on Cigarettes is a Step in the Right Direction: Capital Calling
Key Highlights :
The government of Pakistan has taken a step in the right direction by increasing the Federal Excise Duty (FED) on cigarettes, as it will not only generate additional revenue but also bring down smoking in society, states Capital Calling, a network of academic researchers and professionals. The increase in FED has been appreciated by the organization, which is urging the government to remain firm against the pressure of multinational companies.
The sale of illicit cigarettes has plummeted after the implementation of a track and trace system, so the propaganda that higher taxes will give rise to smuggling is baseless, states Dr Hassan Shehzad, from IIUI. Preliminary findings of a recent survey have shown that the volume of illicit trade of cigarettes is negligible. He further quotes a report, stating, “Multinational cigarette makers are deliberately spreading the propaganda in the market that volume of illicit trade is increasing after the rise in taxes on cigarettes, which is a misplaced argument.” The report further mentions that “there has been an increase in revenues of international cigarette brands this year according to their own reports.”
It is estimated that cigarette consumption has drastically declined after the recent taxes on tobacco, resulting in a reduction of health cost of cigarettes to one billion dollars from over three billion dollars annually. At the same time, the revenue that the government will generate will be touching the figure of Rs250 billion. Both these indicators are positive for Pakistan.
Sanaullah Ghumman, from PANAH, said that the government should keep on increasing taxes on tobacco products regularly as per guidelines by the World Health Organization (WHO). Khalil Dogar, from SPARC, said that it is deplorable that the tobacco industry is putting up illicit trade of cigarettes as an excuse to seek undue tax favours for the production of a non-essential good, states Capital Calling, a network of academic researchers and professionals. He states illicit trade is there in the market but the volume of taxes and health levy should be at a par with a global market. He states that the percentage of illicit cigarettes is far less than the figure claimed by the industry. This is a cover used by the tobacco industry to divert people’s attention from underreporting.
It cites a report stating, “These companies underreport their production and then sell their non-reported products in the illicit market, causing a loss in billions of rupees to the national exchequer. Furthermore, illicit trade is not an excuse because the industry is making deadly non-essential products.” It says that illicit trade cannot justify tax favours as two wrongs don’t make a right. It states that the government needs to counter illicit trade as well as increase the taxes on tobacco products.
In another report, Khalil Ahmed from Protection of the Rights of the Child (SPARC), had mentioned that increasing the FED in February was a good step that shouldn’t remain a one-time activity. Keeping the World Health Organization’s recommendation in consideration, Pakistan should increase taxes at regular intervals so that inflation and per capita income are accounted for and Pakistanis remain protected from the harms of tobacco products. SPARC stated that this increase can be a step towards solving Pakistan’s financial dejection, provided that the government is not misled by the tobacco industry’s misinformation campaign.
The increase in FED on cigarettes is a step in the right direction, as it will not only generate additional revenue but also bring down smoking in society. The government should keep on increasing taxes on tobacco products regularly as per guidelines by the World Health Organization (WHO). The tobacco industry cannot claim that it is fulfilling its duty, as illicit trade cannot justify tax favours as two wrongs don’t make a right. The government needs to counter illicit trade as well as increase the taxes on tobacco products at regular intervals, so that inflation and per capita income are accounted for and Pakistanis remain protected from the harms of tobacco products.
