Smoking-related diseases, deaths: Expenses cost exchequer over $3.85bn annually

ISLAMABAD: The expenses attributable to all smoking-related diseases and deaths in Pakistan cost the national exchequer over $3.85 billion annually, while the tobacco industry’s total tax contribution is nearly 20 percent of the amount.

A policy brief, “The Huge Economic Cost of Tobacco-Induced Diseases in Pakistan,” by the Pakistan Institute of Development Economics (PIDE) revealed this. It said indirect costs (morbidity and mortality) make up 70 percent of the total cost.

The major share (71 percent) of the total smoking-induced cost comes from cancer, cardiovascular, and respiratory diseases.

The actual economic cost, which includes morbidity, mortality, and opportunity costs, is fivefold the tax revenue collected from the tobacco industry, the report stated.

The study recommended that keeping in view the economic and health costs of tobacco consumption, an increase of four to five times the current tax rate is strongly recommended.

However, as a start, it is imperative that the Federal Board of Revenue (FBR) raised excise taxes to meet the WHO’s recommended threshold of 70 percent of the retail price of a cigarette pack.

The study found that despite the evidence that higher tobacco taxation discourages tobacco consumption, Pakistan has a highly lenient tobacco tax policy. Consequently, the tobacco industry enjoys a thriving customer base, currently comprising 24 million active tobacco users.

Former Head of the Tobacco Control Cell Pakistan and country’s former focal person for FCTC Dr Ziauddin Islam said the government should reduce the purchasing power of new smokers by increasing taxes on the tobacco.

He said that once the number of smokers is reduced, this would automatically help bring down the number of tobacco-related diseases and overall health cost in the country.

The PIDE study also said the industry has created an illusion of being one of the largest taxpayers in Pakistan.

Due to the absence of the calculated costs of tobacco consumption in Pakistan, policymakers cannot compare the true economic cost of tobacco consumption with the revenue receipts and submit to the industry’s claims, it said.

In reality, the study said, that tobacco use inflicts substantial costs on Pakistan’s economy—way beyond any tax revenue collected from the tobacco industry.

The report urged the FBR to narrow the tobacco industry’s tax maneuvering space by gradually moving to a single-tier taxation system.

The current tax structure enables the tobacco industry to sell cheaper cigarettes, it said.

A tax policy that effectively reduces tobacco affordability may save millions of youths from being trapped into an indeed expensive life-long loyalty, the study added.

Copyright Business Recorder, 2021