ISLAMABAD: Health activists have predicted a win-win situation for the government, health authorities and the general public as a new survey showed that tax avoidance due to illicit cigarettes trade will be negligible compared to 40pc claimed by the tobacco industry.

They have estimated that the government will get at least Rs60 billion after increasing the federal excise duty (FED) on tobacco products, as an additional revenue in the form of tax and over Rs400 billion will be saved as health cost which will decrease the financial burden on health authorities and the public.

Country head for Campaign for Tobacco Free Kids Malik Imran, while rejecting multinational tobacco industry’s claim of illicit cigarettes in the market, said companies continued claiming since 2014 that the share of illicit cigarettes was 40pc of the market.

“This number is used consistently to cause panic in the government. According to independent studies, the actual share of illicit cigarettes in the market is around 18pc. A major part of this actually belongs to multinational brands,” he said.

Health activists say tax avoidance due to illicit cigarettes trade will be negligible compared to 40pc claimed by industry

“Now that a track and trace system has been put in place, the possibility of illicit trade of cigarettes has almost died down,” said Mr Imran.

He added that they had conducted a survey to explore the volume of illicit cigarettes in the market. Though the findings of the survey will be made public next week, “tentatively we can say the volume is now negligible.”

He said multinational cigarette makers were deliberately spreading propaganda that the volume of illicit trade was increasing after the rise in taxes on cigarettes.

There has been an increase in revenues of international cigarette brands this year according to their own reports, he said.

“The track and trace system has been implemented fully and no industry is now able to do illegal business,” he stated.

He said it was estimated that cigarette consumption had plummeted after the recent taxes on tobacco. He said due to the decline in consumption, health cost of cigarettes is expected to come down to one billion dollars from over three billion dollars annually.

Mr Malik pointed out that after increasing the taxes on cigarettes, the volume of expenditure on tobacco related diseases annually would also be reduced from Rs620 billion to Rs200 billion.

A research study estimates of the illicit trade market as a percentage of the total cigarette market in Pakistan range from 9pc to 18pc. In contrast, the industry claims that illicit trade was 40pc of the total sales volume.

Sanaullah Ghumman, secretary general of Pakistan National Heart Association, said the increase in the FED on cigarettes was in line with the recommendations of the World Health Organisation (WHO). Therefore, the public should support the government’s move to discourage tobacco consumption.

He said the government should stand by its decision of the increase in the FED as this would help collect additional revenue of Rs60 billion from taxes on the cigarettes.

He alleged that multinational tobacco companies would show their production less to the government to evade taxes and then sell their under-reported stock in the open market, causing a loss of billions of rupees to the national exchequer.

Published in Dawn, May 2nd, 2023

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