ISLAMABAD: As the draft for the 2017-18 fiscal year budget is close to finalised, the Ministry of National Health Services (NHS) has written to Finance Minister Ishaq Dar and Special Assistant to the Prime Minister on Revenue Haroon Akhtar Khan suggesting that the federal excise duty (FED) on cigarettes be increased.

In the letter, available with Dawn, the ministry suggested increasing FED from Rs32.98 to Rs44 (on a pack of 20 cigarettes) on the lower slab of all cigarette brands. This would increase revenues by Rs39.5 billion and prevent 650,000 premature deaths from smoking.

The ministry also suggested earmarking 2pc of tobacco tax revenues for the Prime Minister’s National Health Programme for the treatment of non-communicable diseases related to tobacco use.

“Remove all exemptions of tobacco taxes provided to Navy, President of Pakistan, the President of AJK and the Governors of the Provinces, members of their families and guests. In order to monitor production of cigarettes, it is recommended to implement Electronic Monitoring System (tacking and tracing system) on priority basis,” the letter, signed by NHS Minister Saira Afzal Tarar, said.

Letter to finance minister, special assistant to PM on revenue says increased FED would increase revenues by Rs39.5bn

Last week, health rights activities suggested increasing cigarette prices in the upcoming budget to make cigarettes inaccessibly to children.

Nadeem Iqbal, the CEO of The Network for Consumer Protection, also alleged that international companies were profiting at the cost of public health and had pocketed a profit of Rs30 billion last year.

He claimed that the international tobacco industry had create a smokescreen using deceptive tactics, such as arguing that the counterfeit tobacco industry had captured their market and so the Federal Board of Revenue (FBR) should introduce third tier with lower tax incidence that will allow the international industry to compete with counterfeit cigarettes instead of raising taxes.

The letter also noted international obligations, and stated that Pakistan signed the Framework Convention on Tobacco Control in 2004, under Article 6 of which Pakistan has to implement tax and price policies on tobacco products as a way to reduce tobacco consumption.

Tobacco taxes that translate into price increases are considered the most effective option to reduce tobacco use and increase revenues.

The letter said a technical working group formed by the ministry – which included members from the FBR, Bloomberg Partners, the World Health Organisation, World Bank and the Tobacco Control Cell – has recommended that the lower slab of all cigarette brands be taxed at Rs44 per pack.

Packs of 20 cigarettes that retail for up to Rs88 make up the lower slab, and packs with a retail price higher than Rs88 are in the upper slab.

The letter mentioned a research study on tobacco taxation in Pakistan conducted by the FBR, World Bank, University of Toronto, Johns Hopkins University, the University of Illinois and other institutes, which found that a uniform specific excise tax that accounted for Rs44 per pack could reduce the number of smokers by 13.2pc.

The study also found that if tax is increased to Rs44, revenues would rise by Rs39.5 billion and 650,000 million premature deaths caused by smoking among current smokers could be avoided.

Tobacco is the cause of death for around 108,800 people in Pakistan every year, which translates to 298 deaths per day. The letter said that immediate tobacco control measures are needed to save the lives of the people of Pakistan, and one of the measures to reduce the demand of tobacco products is increasing taxes on tobacco products.

Published in Dawn, May 18th, 2017