Taxes on cigarettes: think tank for taking health cost into account

ISLAMABAD: Capital Calling, an Islamabad-based think tank on Wednesday strongly proposed that the taxes on non-essential items like cigarettes should be brought at a par with international standards.

In a statement issued on Wednesday, it stated that the government’s reluctance to change tobacco tax policy is partly due to its failure to fully appreciate the smoking-attributable fraction (SAF) of health and social costs. This makes its benefit-cost analysis of tax revenue faulty and compromised over health outcomes.

Therefore, Capital Calling, has called for taking the health cost of cigarettes into account at the time of fixing taxes on this industry of non-essential goods so that it does not lose its “hard-won stability.” This, it said, is one of the many essential steps to take though.

The parameters set by the World Health Organization (WHO) for taxing cigarettes take into account the volume of mortality and morbidity that this product causes in the society. Research reports have mentioned that over 24 million Pakistanis are active smokers inflicting irreparable damage on passive ones.

The country has turned into a haven for cigarette production as it is counted among the 9 poor states that account for production of 90 percent of cigarettes for the world.

The think tank also quoted a research report by PIDE, a government entity, revealing “when the government abolished the third tax tier in 2019 which effectively reduced the tobacco industry’s maneuvering space to sell cheaper cigarettes by avoiding taxes, the tax contribution of the industry actually increased to Rs 120 billion compared to Rs 92 billion in 2016. This raised the tobacco industry’s share of total tax collection to 3 percent from 2.15 percent in fiscal year 2016-17.

Copyright Business Recorder, 2024