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Pakistan introduces new tobacco taxes to boost revenue, discourage smoking
Publication Date : 30-05-2014
Economic and health experts have suggested that the government impose a uniform specific tax of 31.2 Pakistani rupees (US$0.31) per pack on cigarettes, in a bid to raise revenue and discourage people from smoking.
The proposed move is expected to raise additional revenue to the tune of 27 billion rupees and comes at a time when Finance Minister Ishaq Dar’s team is considering various proposals to generate much-needed to meet next year’s revenue target of 2,810 billion rupees.
A study, conducted by former World Bank vice president Shahid Javed Burki, former finance minister Hafeez Pasha, Federal Board of Revenue member Aftab Anwar Baloch and other international academics, revealed that a tax that accounted for 70 per cent of the average price of cigarettes could reduce overall tobacco consumption by 7.5 per cent.
This is expected to lead over half a million smokers to quit or reduce their intake, reducing tobacco-related deaths by over 180,000 per year.
The study, prepared for the International Union against Tuberculosis and Lung Disease (The Union) and the World Health Organisation (WHO), was released in Islamabad on Tuesday by the Coalition for Tobacco Control in Pakistan.
The increased tax may also prevent 725,000 young people from taking up smoking every year.
The report links a 10pc increase in average cigarette prices to a 5 per cent reduction in cigarette consumption across the board.
Over 22 million Pakistanis over the age of 18 (approximately 19 per cent of the population) currently use some form of tobacco. Almost one third of Pakistani men (32.4 per cent) and 5.7 per cent of women smoke, while the use of smoke-less tobacco products such as gutka, naswar and paan is also quite widespread.
WHO National Programme Officer Shahzad Alam Khan said the cigarette market in Pakistan was highly concentrated, with two companies controlling 98 per cent. He said these manufacturers were now looking to target young people and women to expand their sales.
Saying that tobacco among children under the age of 10 had also increased, Khan suggested that naswar and other tobacco products should also be taxed.
Developed countries use excessive taxation as a way of discouraging citizens from smoking, but Pakistan is one of the few countries where prices of tobacco products are still quite low.
Dr Foudad Aslam, an expert with The Union, said that low taxes coupled with low costs for manufacturers made cigarette prices in Pakistan among the lowest in the world.
He said Pakistan’s tiered system led smokers to switch to cheaper brands rather than quitting. He said that a fixed excise duty of 31.2 rupees per pack would guarantee more revenue for the government and jack up retail prices for the consumer, discouraging tobacco use in the long run.
*US$1 = 98.73 Pakistani rupees