Pakistan loses Rs209 billion in tobacco taxes in last five years: Report

Pakistani government has lost at least Rs209 billion in tobacco taxes in the last five years due to inconsistent taxation policies and poor revenue collection mechanism for the tobacco industry, the official figures show.
The data shows that Pakistan’s tax collection on the tobacco products sharply fell down in 2017 when the then government introduced a discriminatory third tier taxation on the cigarettes.

A comparison of the tax collection data in Pakistan and India showed that both the countries were collecting Rs116 billion and Rs601 billion respectively through tobacco taxes in the fiscal year 2016. Indian tax collection in the following years increased steeply while Pakistan’s tobacco tax collection registered a sharp decline with the introduction of the third tier taxation.

Pakistan’s tax collection dropped from Rs116 billion in 2016 to Rs85 billion in 2017; and then registered a modest increase in 2018 with Rs90 billion. The tax collection was Rs117 billion in 2019; Rs116 in 2020, according to the officials figures released by the Federal Board of Revenue.

Pakistan’s tax collection from tobacco industry is projected to reach Rs124 billion in this fiscal year while India’s tax collection would reach Rs910 billion. These Indian numbers are converted to Pakistani rupees.

The official figures reveal that India with almost same volume is making seven times more tax revenue from the tobacco industry.

Country Representative Campaign for Tobacco-Free Kids Malik Imran Ahmad said that Pakistan’s cigarettes production jumped around 90 percent with the introduction of third tier taxation.

The government should introduce a single-tier tobacco taxation and increase taxes to discourage smoking among children and the youth, he said, adding the third tier taxation system that was introduced by the then government under the influence of tobacco industry resulted in the billions of rupees revenue loss.

He said the government was misguided by the tobacco industry that illicit share of cigarettes was huge and they cannot compete in the local market, and claimed that the informal sector would become formal and result in additional tax collection.

Ahmad said the government should devise a robust mechanism in the upcoming budget to boost tobacco tax collection and reduce the number of smokers that would automatically help reduce the country’s health expenditures.

The tobacco is the cause of 160,100 deaths in the country every year and that some 29.3 million adults currently use tobacco in some form. The economic cost of smoking in Pakistan amounts to Rs165 billion, mostly due to health reasons.

According to World Health Organization (WHO), tobacco excise taxes should account for at least 70 percent of retail prices for tobacco products.

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