KARACHI: Social Policy and Development Centre (SPDC) has proposed tobacco tax reform that would greatly help the Government of Pakistan achieve its commitment to reduce tobacco use and reduce deaths from to non-communicable diseases (NCDs) as per its pledge to achieve the SDG-16 and align its tobacco tax policy with global best practices.
According to a policy note released by the SPDC, to fulfil its long-term commitment to using tax and price measures to reduce tobacco consumption, the government must continue reforming the tobacco tax system by a) implementing significant excise tax increases to make cigarettes progressively more expensive and less affordable, b) incorporating an automatic inflation adjustment mechanism in the tax policy, c) moving to a uniform federal excise duty for all cigarette brands to simplify the tax system, and d) harmonizing excise taxation across all tobacco products.
The SPDC policy note entitled “Modeling the Revenue and Health Implications of Tobacco Tax Policy in Pakistan: Options for the Federal Budget 2021-22” portrays a grave situation of tobacco use in Pakistan.
According to SPDC, the average excise tax share on cigarettes in Pakistan is 45.4% of the retail price, much lower than the WHO minimum recommended rate of 70%. Increasing the tax rate will improve health outcomes by reducing cigarette consumption and generate additional revenues for the government.
With a prevalence rate of 19.1%, about 30 million adults (age 15 +) currently use tobacco in the country. Tobacco use is the leading cause of deaths due to non-communicable diseases (NCDs), killing an estimated over 160,000 people each year. Tobacco taxation is used as a policy instrument for tobacco control in Pakistan, serving a dual objective of public health promotion and revenue generation. However, the current level of the effective excise tax rate on cigarettes is still the same as five years ago in 2016-17. Therefore, cigarettes in Pakistan have become more affordable as the cigarette prices in Pakistan are lowest among the regional countries, including India, Bangladesh, Sri Lanka, Nepal and Iran.
According to SPDC, the in-depth analysis in the report shows that raising the excise tax rate even by only 30% would result in 219,000 fewer smokers, a 3.8% reduction in smoking prevalence among adults and the prevention of 424,000 smoking-attributable deaths, including 348,000 future young smokers. On the revenue side, it will generate additional revenue of Rs19 billion – an increase of 14.4% over the base year collection.
Copyright Business Recorder, 2021