Increased FED on Cigarettes Helps Govt Generate Additional Rs. 11.3 Billion

The government’s decision of increasing federal excise duty (FED) on cigarettes in February 2023 has resulted in an additional collection of FED to the tune of Rs. 11.3 billion in the fiscal year 2022-23 (FY23) so far, an increase of 9.7 percent from the same period of the previous year.

During an event organized by the Society for the Protection of the Rights of the Child (SPARC), Malik Imran, who is the Country Head of Campaign for tobacco-free kids (CTFK), mentioned that an additional Rs. 4.4 billion VAT revenue has also been obtained in FY23 which is an increase of 11.5 percent from the previous year. This additional Rs. 15.7 billion revenue makes up 0.201 percent of our GDP which is a significant boost for a struggling economy like Pakistan, he highlighted.

During the event, health activists also presented a Simulation Model on Tobacco Taxation which explained how increased tobacco taxation is a win-win situation for the government and people of Pakistan.

Imran said that taxation is a key revenue source for any government and taxing non-essential items such as tobacco must be taxed to the maximum in order to ensure fiscal imbalance, so the national exchequer does not suffer from it.

He said that figures reveal that increased taxation is beneficial for the economy but the tobacco industry misleads everyone by crying the illicit trade excuse. He added that the blown-up figure of illicit trade is used to divert people from underreporting. These companies underreport their production and then sell their non-reported products in the illicit market, causing loss of billions of rupees to the national exchequer.

Dr. Ziauddin Islam, Former Technical Head, Tobacco Control Cell, Ministry of Health, said that tobacco is the largest silent killer in Pakistan as above 170,000 people die due to tobacco use each year. This pandemic also causes an annual economic burden of Rs. 615 billion which is 1.6 percent of Pakistan’s GDP.

He explained that increased prices bring a decrease in production and consumption which decreases the health cost burden. According to the estimates, there has been a 31.7 percent decline in declared production of cigarettes in FY23 compared to the previous year. Learning from this example, which is also recommended by World Health Organization, Pakistan should increase taxes at regular intervals so that inflation and per capita income is accounted for and Pakistanis remain protected from the harms of tobacco products.

Khalil Ahmed Dogar, Program Manager SPARC said that the children of Pakistan are being targeted by the tobacco industry so that “replacement smokers” could be recruited. Around 1,200 Pakistani children between the ages of 6-15 years start smoking every day. He mentioned that on average Pakistani smokers spend 10 percent of their monthly income on cigarettes. Therefore increased prices remain the most effective tool in keeping these killer products away from the spending power of children and low-income groups.

Dogar added that all stakeholders must cast their differences aside and unite to protect our children and youth from the harms of tobacco. Increasing tobacco taxes is such a step that should be regularly implemented.

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