Safeguard children, low-income group: Tobacco industry leaving no stone unturned to undo govt’s efforts

ISLAMABAD: The tobacco industry is leaving no stone unturned to undo the great work done by the government of Pakistan in the current year to safeguard children and low-income group from the harms of tobacco.

These views were shared by health activists in a press statement by the Society for the Protection of the Rights of the Child (SPARC).

According to the activists, Prime Minister Shehbaz Sharif made a landmark decision to increase federal excise duty (FED) on cigarettes in February 2023. However, the tobacco industry is trying to destroy this good work by using fake statistics of illicit trade, and production in order to increase their profit at the expense of national exchequer.

Malik Imran, country head of Campaign for Tobacco-Free Kids (CTFK) said it was shocking that in a time period when taxes increased and production of the three major cigarette manufacturing companies declined, their turnover and gross profit still increased. “This phenomenon is unheard of in today’s business world. This reflects that the firms are using their declared production as a tactic to avoid taxes and influence tax policy.”

He mentioned that as far as the tax revenue is concerned, the total tax revenue paid by these companies (including FED and GST) has increased from PKR114.5 billion in July 21-March 22 to Rs 127.5 billion in the first nine months of the current fiscal year, representing a growth of 11.3 percent.

Imran added that the good work done by the government of Prime Minister Shehbaz Sharif must not be lost. The government can stabilise the economy and provide relief to citizens as long as it does not get sidetracked by the deceptive campaign of the tobacco industry.

Dr Ziauddin Islam, former technical head Tobacco Control Cell, Ministry of Health, said that cigarette manufacturers have over-shifted the tax burden to consumers to increase their profitability.

The tobacco industry has used various tactics, such as front-loading and abrupt changes in production, to avoid tax hikes and influence tax policy. Another ploy by the tobacco industry is presenting overblown figures of illicit trade, to pressurize the government into withdrawing FED in the budget.

After a tax increase of over 150 percent in February 2023, the FED share rose to 51.6 percent—though it has not increased as much due to tax over-shifting by the cigarette industry and remains lower than the widely-accepted benchmark of 70 percent. The consumer price was increased by Rs 131.

Similarly, the price increase of premium brands was more than the tax increase. This way, the cigarette industry has over-shifted the tax increase.

Khalil Ahmed Dogar, program manager SPARC said that the tobacco industry practices underreporting where they hide their actual production figures to avoid taxes. These companies under-report their production and then sell their non-reported products in the illicit market, causing billions of loss to the national exchequer.

He shared the latest research and revealed the percentage of illicit packs of cigarette was around 15 percent. Khalil added that policymakers must not listen to the research conducted and sponsored by the tobacco industry because the industry is on problem end i.e. manufacturing and selling harmful products which are causing huge losses to Pakistan’s public health infrastructure and economy.

Copyright Business Recorder, 2023