TAXES ON TOBACCO PRODUCTS

March 25, 2016

 Islamabad, 22-03-2016: Pakistan signed Framework Convention on Tobacco Control (FCTC) in 2004. Under Article 6 of FCTC, Pakistan has to implement tax and price policies on tobacco products as a way to reduce tobacco consumption.

2.                     Tobacco taxes that translate into price increases are considered the single most effective option for reducing tobacco use and increasing revenues. Higher tobacco taxes save money by reducing tobacco-related health care costs, including Medicaid expenses.

3.                     In order to finalize recommendations to increase taxes on tobacco products in line with FCTC recommendations, a technical working group on tobacco taxation was formed by this Ministry. Experts from Federal Board of Revenue, The Union (Bloomberg Partner), World Health Organization, World Bank and Tobacco Control Cell were members of the working group.

4.                     The working group deliberated upon the issue and made following recommendations to increase taxes on tobacco products in Federal Budget 2016-17:

 

i.                Lower slab of all brands of cigarettes may be taxed @ Rs. 44 per pack of 20 cigarettes (from Rs.14.20 to Rs. 22 per 10 cigarettes) with annual adjustment to tobacco tax rates introduced to minimize the impact of inflation and per capita income growth.

ii.                All exemptions of tobacco taxes provided at S. No. 4 of the Schedule 3 of Federal Excise Act (i.e  Navy, President of Pakistan, the President of Azad Jammu & Kashmir and the Governors of the Provinces, members of their families and guests) should be removed.

iii.              Earmark 2% of tobacco tax revenues for Prime Minister’s National Health Program for treatment of NCDs.

 

5.                     According to a research study on tobacco taxation in Pakistan jointly conducted by FBR, World Bank, University of Toronto, Johns Hopkins University, University of Illinois at Chicago and Beaconhouse National University, a uniform specific excise tax that accounts for Rs.44 per pack of 20 cigarettes could reduce number of smokers by 13.2%, increase tax revenues by Rs. 39.5 billion, leading to reduction of 0.65 million premature deaths caused by smoking among current smokers, while also preventing 2.55 million youth from taking up smoking.

6.                     It is requested that necessary directions may be issued to the concerned for inclusion of the above in 2016-17 budget proposals. This measure will be critical to reducing consumption of tobacco products and save lives of our people.