Islamabad-Removal of all slabs and implementation of Federal Excise Duty (FED) correctively on each pack of cigarette can not only increase the revenue of the government but will also discourage tobacco consumption in the country, a study suggested. Pakistan National Heart Association (PANHA) held a study, according to which it was revealed that a different slab system followed by the Federal Board of Revenue (FBR) for the taxation of the tobacco industry is more beneficial for the industry than giving profit to the national exchequer.  According to the study conducted by the group working for anti-tobacco environment in the country, removal of all slabs and application of specific FED of Rs44 per pack of cigarettes will improve revenues from Rs92 billion to 120 billion. The study also said that the 3rd special slab introduced by the FBR should be removed from the finance act.

The study also suggested that to control the tobacco trade the trace and track system must be implemented and a transparent audit of tobacco industry must be conducted.  The study said that the national exchequer suffered Rs62 billion direct loss in the last three years in the revenue collection from cigarettes, while the tobacco industry profit has increased since 2016 after the introduction of third slab which is in an accessible range of public.  According to the statistics in 2017-18 the profits of PMI and PTC have gone up by 160% and 105% as per their financial statements.

According to the tax structure on cigarettes there are two main taxes on the cigarettes including FED and sales tax. In the first slab Rs 74.10 to Rs 74.80 is imposed in which the price of cigarette pack is more than Rs 88 or Rs 90 respectively.  In the second slab Rs 32.98 to Rs 34.40 FED is collected from the cigarette pack, if its price is less than Rs 88 or Rs 58.50 or more. However, in the third slab where the price of a cigarette pack is less than Rs 58.50 only Rs 16 FED is imposed. The low FED in the 3rd slab is helping in profitable business of tobacco industry on the cost of public’s health said the study. The study said the total cigarette production in 2017-18 was around 83 billion while in the break-up of market share multi-national companies traded 96 to 98 percent of the total market while the local industry share was between 2 to 4 percent.

The study also revealed that the independent survey in the country shows that illicit trade volume in the market is not more than 9 percent, while no audit of tobacco companies was done by FBR even after the recommendations by last Senate Standing Committee on health in 2017.

The study also revealed that FBR introduced the 3rd tier citing it as a measure to discourage illicit trade but the decision caused Rs30 billion direct loss to exchequer in 2016-17.

 

Meanwhile, Ministry of National Health Services (NHS) has also asked the finance ministry to withdraw the 3rd slab of Federal Excise Duty (FED) on cigarettes introduced in previous budget as the decision resulted in increase in cigarettes production and consumption.

In a letter written to Federal Minister for Finance, Revenue and Economic Affairs Asad Umer, the health minister informed that after introduction of 3rd slab in 2017, the local production of cigarettes increased by 77pc compared to production in previous year. The letter states that as a signatory to Framework Convention on Tobacco Control (FCTC), Pakistan has to implement tax and price policies on tobacco products as a way to reduce tobacco consumption. Moreover, Pakistan is obligated to achieve the targets set in Sustainable Development Goals (SDGs).