There’s a growing trend across the globe to use fiscal and tax policy measures as interventions to improve public welfare levels, end malnutrition and protect the environment.

Governments tend to avoid taxation that impacts these broader goals directly or indirectly for sustainable economic growth. A close link between the tax policy goals with broader economic, health and environmental targets is especially needed if the economy is faced with a myriad of structural challenges, ranging from low productivity to sluggish exports to increasing poverty levels and inequality to climate change. The need for aligning tax policy with these long term objectives in Pakistan was never felt more strongly than now.

Yet, the focus of tax policies in Pakistan remains more on revenue generation to finance the government expenditure instead of on public wellbeing. The extremely narrow tax base and one of the lowest tax-to-GDP ratios in the world mean the fiscal authorities are always hunting for easy taxable targets to boost revenues at the cost of environmental sustainability, public health, malnutrition, etc. The finance supplementary bill introduced in the parliament by the Imran Khan administration is yet another reminder of the misplaced and regressive tax policies.

If nutrient-rich food in the form of fortified milk products is made costlier, the nutrients also become unaffordable and inaccessible, leading to malnourished adolescents

The major victims of thoughtless taxation will be renewable energy and child and mother nutrition as the mini-budget withdraws sales tax exemption on solar energy and a range of nutritious food items: butter, cheese, yoghurt, infant formula milk, baby food, etc. While increased prices of solar equipment will badly hit the adoption of solar energy by the middle-class homeowners as a cheaper, environment-friendly alternate to costlier, erratic grid power, the food taxation is feared to increase malnutrition in low-middle-income groups, particularly women and children, the cost of which for the economy is going to be way higher than a few billions the government hope to rake in.

Read more: 'Mini-budget': What will get costlier?

According to various studies, there are strong economic and health rationales for using tax and fiscal policies to improve diets and prevent non-communicable disease, particularly when prices of products don’t fully reflect their full social benefits or costs. Fiscal policies can be used to alter retail prices to increase consumption of nutrient-rich foods and conversely.

“Taxation and financial policies directly impact the health and nutritional status of vulnerable groups,” Dr Riffat Aysha Anis, professor at the IBADAT International University Islamabad, says in response to a question. “Development of an effective fiscal policy to improve diets takes into account political economy and the potential benefits to public health. Higher taxation and inflation increase malnutrition, especially in low-income individuals, by reducing their power to buy nutrient-rich foods, especially proteins. Multiple forms of malnutrition result in reduced schooling, cognitive impairments, labour productivity loss and higher healthcare costs that slow down a nation’s economic growth.”

The high prevalence of all forms of malnutrition is a major concern in Pakistan as the country is confronted with the burden of childhood stunting and wasting or under-nutrition and micronutrient deficiencies for decades, which have a marked effect on young children and women of reproductive age. Globally, Pakistan is home to the highest number of stunted (low height for age) children after India and Nigeria. Over 40 per cent or 12 million of Pakistan’s children under five years of age are stunted and 17.7pc or around 5.3m are wasted (low weight for height) with 2.5m estimated to be severely wasted, according to the National Nutrition Survey 2018 of the Ministry of National Health Services. Under-5 mortality rate, a critical index of health and nutritional status of a community, is 137 for every 1,000 births, too high by international standards.

Pakistan is one of the first countries to nationally adopt the global Sustainable Development Goals to achieve a 40pc reduction in stunting in children, and reduce and maintain childhood wasting below 5pc. The progress has painfully been slow as there has been a marginal decline in the prevalence of stunting (an average annual reduction rate of about 0.4pc) since 2001 and an increase in the prevalence of wasting from 12.5pc in the 1990s to 17.7pc in 2018. Some 5.9pc children under five years of age are estimated to be concurrently stunted and wasted.

“The National Nutrition Survey 2018 shows that the majority of mothers are malnourished and not able to feed their infants, consequently making their children malnourished again. Hence it is a cycle. There is a need to breach this cycle,” Dr Fauzia Waqar, public health specialist currently a PhD candidate at the University of San Francisco, points out. “By providing nutrient-rich food in the form of fortified milk, children can have a second chance to gain their growth and development. But if the products are made costlier through taxation, the nutrients also become unaffordable and inaccessible, leading to malnourished adolescents.”

Pakistan has very high levels of under-nutrition among women of reproductive age. According to the survey, 42.7pc women of reproductive age are anaemic with a slightly higher proportion in rural (44.3pc) than urban setting (40.2pc) while 14.4pc are underweight. Other micronutrient deficiencies in Pakistani women are that of vitamin D (79.7pc) and vitamin A (27.3pc), making them vulnerable as young mothers. In Pakistan, infant and young child feeding practises are also suboptimal. Less than half of mothers practice early initiation of breastfeeding and around half of the infants aged less than six months are exclusively breastfed. Only one in three infants in the age group of 6-8 months is fed complementary food, and only 3.6pc of children of 6-23 months receive complementary foods that meet the requirements of a minimum acceptable diet.

“The decision to raise prices of fortified infant nutrient products is limiting the second window of opportunity to provide children with the nutrients they need to grow and thrive, and, consequently, overcome stunting. Imposing a 17pc sales tax on locally produced infant nutrition products and baby food contradicts the prime minister’s commitments made with the people to address the malnutrition crisis in the country. Considering the high inflationary climate, there is a need that the locally made nutritional products for infants and children are available at affordable prices — at least half the price of the imported products to meet nutrition needs of children,” Dr Waqar says.

She stresses the need for implementation of the Pakistan Multi-Sectoral Nutrition Strategy (2018-2025) developed to give strategic direction to nutrition-specific and sensitive interventions to address the widespread malnutrition issues of stunting, wasting and obesity. “A multi-sect-oral approach where health, social protection, agriculture and education sectors can pool resources and work together to reduce stunting and wasting in young children is required to address malnutrition. For that, we need to align our tax and fiscal policies with this strategy.”

Published in Dawn, The Business and Finance Weekly, January 10th, 2022



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