Increase in FED on Cigarettes to Push Farmers Below Poverty Line

Tobacco farmers of Khyber Pakhtunkhwa’s economically marginalized areas have warned that the recent exorbitant increase in federal excise duty (FED) on cigarettes will reduce economic prospects for tobacco farmers and increase poverty and unemployment.

The tobacco farmers highlighted the social and economic impacts of the recent FED increase on the tobacco industry at a press conference in Islamabad. Tobacco farmers from Mardan and Swabi districts attended the press conference.

While expressing their concerns about the difficulties faced by the legal cigarette industry, they pointed out the effects of the factors promoting illegal cigarettes in the country and on the lives of farmers. They said that tobacco is an important cash crop and any threat to this crop is a threat to the survival of tobacco farmers which could cause serious socio-economic consequences.

They said that the transfer of a large portion of the tobacco crop from the legal industry to illegal players would reduce economic prospects and result in unemployment.

Only two tobacco companies, with a market share of around 60 percent contribute 98 percent of the tobacco tax collection, whereas all other tobacco companies operating locally contribute only 2 percent to the national exchequer. More than 90 tobacco companies default on taxes causing a loss to the national exchequer.

It is worth mentioning here that the government collected Rs. 153 billion in taxes from 2 companies in 2021-22 while a target of Rs. 200 billion was set for 2022-23 that was further revised to Rs. 315 billion slapping the legal tobacco industry with additional taxes of more than 150 percent.

The farmers said that tobacco cultivation areas are considered resource-deprived and poverty-stricken areas. The legal cigarette industry pays better and more timely prices for tobacco. If tax measures threaten the survival of the legal cigarette industry, the future of thousands of farmers associated with the industry will also be at risk.

Documenting the business of illegal cigarette manufacturers will end the exploitation of tobacco farmers and improve their standard of living, the farmers added.

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