Multinational cigarette makers accused of creating misunderstanding about FED hike

ISLAMABAD: Capital Calling, a network of academic researchers and professionals, has stated that the government is bound to collect over Rs220 billion Federal Excise Duty (FED) imposed on sale of cigarettes during 2023-24.

The network had made this projection about tax collection when the former Prime Minister Shehbaz Sharif took the decision of increasing FED on cigarettes.

In a statement issued on Wednesday by the said network, it lamented that multinational cigarette manufacturers had been constantly creating misunderstandings about the FED increase for its own advantage.

It said the former Prime Minister was not influenced by these tactics as he knew that the cost of health expenditure borne on tobacco-caused diseases is unacceptable by any country, not least when compounded by the tragedy of loss of human lives.

The network, however, stated that the taxes on cigarettes has to be in line with the guidelines set by the World Health Organization (WHO) and should be revised upwards regularly.

It stated that the possibilities of illicit trade in cigarettes is negligible after introduction of track and trace system.

Since 2014, the said companies have been constantly claiming that 40% of cigarettes in the market are illicit. However, some non-government organizations have conducted independent survey to find that this figure is heavily flawed and in reality the magnitude of illicit trade has been reduced to being negligible after the imposition of track and trace system.

Representatives of an NGO state that the said manufacturers 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 blatant attempt at pressuring the government for the benefit of multinational cigarette manufacturers.

He said that the increase in FED has resulted in significant decrease in smoking, adding that the health cost of cigarette-caused diseases is estimated to come down to $1 billion from $3 billion.

The big companies claimed that their sale has been affected because of the increase in FED. This is exactly the purpose of regular increases in FED so that smoker numbers are reduced. The multinationals make a huge assumption that instead of smokers quitting smoking, they start smoking illicit cigarette. This has no factual basis because multinationals count all cigarette quitters as having switched to another cigarette brand.

Capital Calling has asked the caretaker set-up not to budge to the pressure put up by cigarette makers to reduce FED on cigarettes as it will amount to undoing the tax collection process set off by the previous government.

Copyright Business Recorder, 2023