ISLAMABAD: Health advocates have urged the government to implement the recommendations of the Special Committee on Causes of Decline in Tax Collection of Tobacco Sector without delay.

They have said the implementation of the recommendations will not only increase the revenue of the country, it will also save the youth of Pakistan from many diseases, including cancer.

According to the report, available with Dawn, after a sudden decline in tax collection from the tobacco sector in 2016-17, the third tier of taxation was introduced for cigarettes manufactured in the country, lowering tax.

This was done on the bases of various reports claiming the market share of the legitimate sector had been taken over by the smuggled international brands and the production of non-duty paid and counterfeit cigarettes.

Committee calls for reinstating two-tier tax system, imposition of excise duty every year

The matter was also discussed in the Public Accounts Committee (PAC) as government revenue fell from around Rs114 billion to Rs83 billion in 2016-17.

However, in May 2018 PAC became non-functional as the government’s tenure ended and so the Senate chairman established the special committee, chaired by Senator Kalsoom Parveen, to look into the issue.

The report says the committee interacted with all stakeholders including the Federal Board of Revenue, Auditor General of Pakistan, Pakistan Tobacco Board, Ministry of National Health Services, Ministry of Commerce, Pakistan Tobacco Company, Pakistan National Heart Association (Panah), owners of local manufacturing of cigarettes, tobacco growers and others.

“After hearing all the stake holders, the committee reached to a conclusion that the major cause of decline in tax collection was primarily due to the introduction of the third tier which resulted in lower taxes on cigarettes. Moreover third tier of tax was contradictory to the recommendations of the World Health Organization (WHO),” it states.

The report suggests removing the third tier and that the two-tier system be reinstated. It says federal excise duty should be imposed every year to comply with WHO rules.

The smuggling of international brands and the production of non-duty paid and counterfeit cigarettes should be stopped, it says.

Panah representative Sanaullah Ghuman told Dawn his association appreciates the recommendations and suggests the report be implemented without delay.

Legal expert Malik Imran, who participated in meetings of the committee, said health advocates had said reducing the number of tiers to two will increase tax revenue and save the young generation from many diseases including cancer.

“We had also suggested regularly increasing excise tax to account for inflation and income growth and reduce cigarette affordability. Harmonize all taxes across tobacco products and fully implement the Protocol to Eliminate Illicit Tobacco Trade,” he said.

The report has covered most of the concerns and should be implemented in letter and spirit, he said.

Published in Dawn, March 11th, 2019