ISLAMABAD: The government is likely to increase Federal Excise Duty on cigarettes in coming budget (2024-25).
It is learnt that the rates would be enhanced through Finance Bill 2024. One of the proposals under consideration is to raise 19 percent FED on cigarettes despite 37 percent raise recommended by the World Health Organisation (WHO) and 20 percent increased proposed by Health Ministry.
The Federal Board of Revenue (FBR) has proposed further increase in the rates of the FED on cigarettes for next fiscal year. During budget preparation meetings between the FBR and the multinational cigarette manufacturing companies, the latter has made hue and cry over decline in production and increase in volume of smuggled/illicit products in the country.
The WHO has recommended that the FED should be increased by 37 per cent to take the tax share of retail prices to 70 per cent as per international standards.
The tax proposal presented to the health ministry by various anti-tobacco activists includes recommendations of WHO that highlight that raising taxes on cigarettes would not only reduce burden on health care system but also help enhance revenue generation.
According to the tax proposal maintaining the current FED rate might result in a decrease in health recovery and to achieve similar health cost recovery levels observed in 2023-24, an increase of 37pc in FED rate for the upcoming year would help generate additional Rs60 billion in GST from cigarettes for 2023-24.
The cost of tobacco consumption on health care system revealed that 31.6 million adults currently use tobacco in the country and it results in more than 160,000 deaths every year, while smoking-related illnesses and deaths cost the country at least 1.4pc of its GDP annually.
Revenue collections from July 2023 to January 2024 reached Rs122 billion, with full year estimates exceeding Rs200 billion.
The tax proposal demands that raising taxes on tobacco products would help save lives and for the next fiscal year 2024-25, the government should consider embedding the cost recovery in tobacco tax policy through automatic adjustments to excise taxes, ensuring that they cover a certain percentage of the total health costs attributable to smoking.
In its latest policy paper, “Recovering Healthcare Costs and Saving Lives”, the Social Policy Development Centre (SPDC) has proposed a 37 percent increase in FED in the next fiscal year’s budget.
Campaign for Tobacco-Free Kids (CTFK) has proposed 26.6 percent FED increase for the fiscal year 2024-25.
Copyright Business Recorder, 2024
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