islamabad - The Public Accounts Committee (PAC) while urging the Federal Board of Revenue (FBR) to rationalize the tax structure on cigarette prices, stressed on formulation of a national policy to curb the use of tobacco and protect the health of citizens.
The meeting of PAC was held here under chairmanship of the leader of the opposition Syed Khursheed Shah, where Auditor General of (AGP) officials presented the special audit report of multinational cigarette manufacturing companies. The special audit was conducted on the recommendations of PAC.
Chairing the meeting, Khursheed Shah remarked that increase in illicit cigarette trade is the failure of FBR, while the national exchequer has suffered Rs50billion loss because of the negligence.
The audit officials said that introduction of 3-tier policy resulted in increase of tobacco consumption in the country, while illicit trade surged to 25percent.
The special audit report by the presented by Auditor General of (AGP) recommended that Federal Board of Revenue (FBR) needs to rationalize federal Excise Duty (FED) structure which significantly raises cigarette prices and reduces tobacco use.
The audit report added that in order to strengthen tobacco tax administration, increase enforcement, and tax duty free sale of tobacco is required reducing tax evasion and avoidance.
The report also recommended that FBR should implement annual adjustments to tobacco FED rates so that they result in increases in tobacco product prices that are at least as large as increases in per capita incomes.
AGP in special audit also recommended to implement the FCTC guidelines, and recommendations of other stake holders like Ministry of Health Services while formulation of FED policy so that cigarette consumption may be curbed in the country.
The report mentioned that tobacco used in cigarette is processed at ten Green Leaf Threshing (GLT) units. It also pointed out that Ministry of National Health Services (NHS) wrote a ‘Do’ letter, addressing the Minister of Finance in which it deliberated that Pakistan signed the Frame Work convention on tobacco control in 2004.
Under Article 6 of FCTC, Pakistan has to implement tax and price policies of tobacco products as a way to reduce the tobacco consumption. Tobacco taxes that translate into price increase are considered the single most affective option for reducing tobacco use and increasing revenues.
The report recommended that high tobacco taxes save money by reducing tobacco related health care costs, contrary to the above whole taking policy measures FBR all together neglected recommendations of Ministry of NHS regarding increase in FED rate and introduction of affective monitoring system.
The introduction of 03/tiers policy by FBR has completely ignored the health burden on individuals and society which would grow because of reduction in prices it has brought along. With over 23.9 million tobacco users, Pakistan is one of the developing countries with a high tobacco prevalence and morality. Lung and mouth cancer have higher prevalence as compared to other forms and cancer.
Audit is of the view that revenue generation from tobacco sector has never been the aim of national policy.
The only purpose of enhancing the tax rate on cigarette manufacturing was to reduce the actual and potential smokers. For the last seventy years, tax rate on cigarette sales have been gradually increased to meet the set purpose. Reduction of FED rate by introduction of 3-tiers in finance bill, 2017 was a reversal of the last 70 years tax policy on cigarette manufacturing.
Report said that the lower rate of FED has encouraged smoking while lack of coordination between main stake holders in forming national policy towards use of tobacco.
It has been observed that FBR always remained revenue-oriented by levying FED to determine price structure of cigarette and health aspect and economic cost of smoking has never been given due consideration. Similarly, regulations governing the PTB encourage the ground quality of tobacco.
Whereas, the ministry of NHS condemns the use of tobacco and inclined and introduces and implements such a policy which curbs tobacco from consumption and infact, present taxation policy encourages smoking, said report.