ISLAMABAD: The Society for Protection of the Rights of the Child (Sparc), Human Development Foundation (HDF) and Pakistan National Heart Association (Panah) organised a session on ‘Loss of revenue because of deceptive tactics of tobacco industry’ on Friday.
Addressing the participants, Malik Imran Ahmad from Campaign for Tobacco Free Kids said big tobacco industry caused a Rs153bn loss to the national exchequer from 2016 to 2019 due to the low tax rate and by adjusting prices of their most sold brands.
He said after the introduction of the third tier of taxation, around 160 billion cigarettes were produced between May 2017 and March 2019. Big tobacco companies shared 75pc of the total market which means they were able to sell 120 billion cigarettes during the period.
The loss of revenue due to the introduction of the third tier (low tobacco taxes) was Rs77.85bn from 2016 to 2019 and loss of revenue due to price adjustments was Rs75bn from 2018 to 2019, he added.
Waseem Saleem, senior economist Social Policy and Development Centre (SPDC), said large fiscal imbalances in Pakistan required greater tax revenues.
Tobacco taxation can positively contribute to government revenues. Simultaneously, these taxes will also help promote public health objectives.
He said the level of under-reporting of cigarette production had negative implications for the tax revenue. Revenue loss due to undeclared production is estimated to be Rs31bn while by including GST revenue, it becomes Rs37bn (considering the average FED rate of Rs1.93 per cigarette in 2016-17 calculated by dividing total revenue by the volume of sales).
He also said the volume of illicit trade was very low compared to the claims made by the tobacco industry. He said the annual economic cost of smoking in Pakistan was Rs143.208bn.
Published in Dawn, January 12th, 2020