In a recent televised address, the Prime Minister of Pakistan said that tobacco industry provides large revenue which is vital for our economy. He further added that the tax evasion by the same tobacco industry is causing huge loses to the national exchequer.
It is unfortunate that the briefings made to the Prime Minister by various institutions, including FBR, are either wrong, mostly produced by tobacco industry itself, or are half-true, concealing key information that could have helped the Prime Minister to understand the issue in proper perspective.
One may ask, is tobacco really important for our economy? What are the overall benefits and costs of such deadly product? Answering these questions is important for any government to make appropriate policies and lead the nation to safer and better future.
In Pakistan, 80 billion cigarettes are smoked every year giving around Rs.110 billion revenue, generally in the form of Federal Excise Duty and Sales Tax. Tobacco represents only 0.42 % of the total value of crop sector, and only 0.03% of agricultural employment (8,200 persons). Cigarette industry is also
not a major contributor in the manufacturing sector and GDP. Its share in total industrial output is 1.1%.
On top of that the share of cigarette industry in the industrial employment is even less than a half per cent (only 0.3%). Finally, the industry, instead of earning foreign exchange by capitalizing the agriculture production, causes a drain on foreign exchange as a net importer.
On the downside, tobacco consumption inflicts enormous costs on governments and families. In Pakistan, tobacco kills over 163,000 people every year and costs the economy a whopping PKR 643 billion every year, due to health care costs for tobacco-related diseases and lost productivity as a result of pre-mature deaths.
Together, tobacco and poverty create a vicious circle. Tobacco use tends to be higher among the poor families, which, in turn, spend a larger proportion of their income on tobacco. Money spent on tobacco cannot be spent on basic human needs such as food, shelter, education and health care.
Tobacco worsens poverty among users and their families since tobacco users are at much higher risk of falling ill and dying prematurely of cancers, heart attacks, respiratory diseases or other tobacco-related diseases, depriving families of much-needed income and imposing additional costs for health care.
Tobacco industries are continuously targeting children to make them “replacement customers” for the people who died due to tobacco. According to WHO, 1200 children below the age of 15, become smokers every day.
Tobacco is not a necessary commodity for any reason, either. It has neither any nutritional value nor it provides any other health benefits to the consumers. It only adds to their miseries by increasing anxiety, stress, poverty, malnutrition and on top of all, damages the economy and the environment.
In this backdrop, government’s claim of getting revenues from the tobacco Industry is a misnomer. It is actually getting “blood money”, allowing them to kill 163,000 people every year; damage our economy many times more than the revenue they pay; perpetuate poverty in the country and deplete the
environment.
If the Prime Minister really believes in youth- being great potential for progress, he must immediately take steps to reduce tobacco consumption in the country. This involves protecting our children from becoming replacement customers. If this is effectively implemented, there will be no smokers in Pakistan in the next 10 to 15 years.
According to World Health Organization’s Manual on Tobacco Tax Administration, tobacco taxes are proven to be the most effective way to reduce tobacco consumption. Unlike many other developing countries, Pakistan still has one of the cheapest rates of tobacco products in the world. World Bank
Report recommends that, to ensure reduction in cigarette consumption Pakistan should increase tobacco tax rates by at least 30% on cigarettes-annually.
Another study suggests that a 30% increase in price will lead to 33% reduction in cigarette consumption, which would translate into a saving of Rs 48 billion in a year.
It is time for Imran Khan’s government to decide if it still wants its people to continue dying at the hands of merchants of death; its economy to keep enduring yearly health cost burden of over Rs. 640 billion; leave the children at the mercy of tobacco mafia, and that only for a mere Rs.110 billion blood
money?