ISLAMABAD: Anti-tobacco activists have warned that the government would lose revenue and benefits gained through tax reforms in case the Federal Excise Duty (FED) rate is not increased on cigarettes in the upcoming budget (2024-25).

A fact-based study released on Saturday by “The Social Policy and Development Centre” (SPDC) said, 31.6 million adults in Pakistan use tobacco, resulting in over 160,000 deaths annually. Smoking-related illnesses and deaths cost Pakistan at least 1.4% of its GDP annually.

However, the FED reforms on tobacco, introduced in 2022-23, have generated good revenue, with collections reaching Rs 122 billion from July 2023 to January 2024.

The study stated that the reforms have not only increased revenue but also contributed to public health by reducing consumption and potentially recovering 17.8% of the total healthcare costs associated with smoking in Pakistan.

It said; however, maintaining the current rate could result in a decrease in health recovery from 17.8% to 15.6% and to achieve similar health cost recovery levels observed in 2023-24, a 37% increase in the FED rate for the upcoming year is suggested.

Anti-tobacco activists argue that a tax increase will not promote illicit trade, as research evidence shows that tobacco firms manipulate their reported production to influence tax policy and evade taxes. The recently initiated track and trace system is expected to reduce counterfeiting, curb illicit trade, and keep a check on front-loading.

Study said the proposed tax rates for the Budget 2024-25 aim to increase the FED share in retail price to 70%, generating additional revenue and promoting public health. The tax proposal is a clear 'win-win' in terms of health and revenue for the government and the people of Pakistan.

Copyright Business Recorder, 2024


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