RECORDER REPORT

ISLAMABAD: Ministry of National Health Services, Regulations and Coordination has claimed that the local cigarette production increased by 71 percent during the first five months of the fiscal year 2017-18 due to lower tax rates.

The ministry has written to the Federal Board of Revenue (FBR) to reconsider the policy of reducing cigarette prices.

“Moreover, to curb illicit trade in tobacco products, the tracking and tracing system for tobacco companies should be implemented on priority basis,” the ministry has requested the FBR through a letter.

The ministry said that it evaluated the relevant impact of current tax structure on the revenue growth and growth in production of cigarettes.

It said that according to the FBR, during the first five months of FY 2017-18, there is about 11 percent growth in cigarette tax revenues from Rs20,404 to Rs22,623 million. The ministry said that parallel to this, according to the State Bank of Pakistan, the production of local cigarettes increased to 71 percent.

“Even if we consider that the cigarette production growth has fully captured the illicit, non-duty paid cigarettes market and illicit trade in tobacco products has fully been eliminated, still there is about 49 percent growth in local cigarette production,” it said.

The ministry said that this growth in local cigarette production will definitely increase cigarette consumption in the country as these cigarettes will be sold locally. “Resultantly, tobacco related deaths in the country will be increased in addition to increase in tobacco-related healthcare costs,” it said.

Prior to the federal budget 2017-18, Ministry of National Health Services, Regulations and Coordination had proposed to tax the lower slab of all brands of cigarettes at Rs44 per pack of 20 cigarettes.

The ministry said that this proposal was based on a research study on tobacco taxation in Pakistan jointly conducted by FBR, World Bank, University of Toronto, Johns Hopkins University, University of Illinois in Chicago and Beaconhouse National University.

According to the study, a uniform specific excise tax that accounts for Rs44 per pack of 20 cigarettes could reduce number of smokers by 13.2 percent, increase tax revenue by Rs39.5 billion, leading to reduction of 0.65 million premature deaths caused by smoking among current smokers while also preventing 2.55 million youth from taking up smoking.

Meanwhile, a study conducted by the Human Development Foundation to assess the volume of illicit cigarette brands in Pakistan revealed the tobacco industry’s contention that illicit cigarettes constitute a major chunk of the total market is not supported.

The study said that the proportion of illicit packs in the data set as a whole is around 10 percent. The bulk of the packs scrutinized did indeed meet most of the criteria for legitimate products, it added.