ISLAMABAD: The government is expected to collect Rs200 billion from the tobacco industry this year after increase in tax, a recent study revealed. In the last fiscal year, tax collection from the tobacco industry stood at Rs148 billion.

According to the study titled, ‘Higher tobacco tax helps bring down sale of cigarettes in Pakistan’, released by The Capital Calling on Sunday, out of 31 million adult tobacco users in the country, one in every 94 smokers was forced to quit smoking due to increase in prices of cigarettes due to high tax.

Smokers were forced to quit smoking after a significant increase in Federal Excise Duty (FED), ranging from 146pc to 154pc in February this year, said the study, which was based on ground surveys conducted in Islamabad, Rawalpindi, Lahore and Peshawar.

Interviews with smokers and the data collected from these cities show that they were now saving the money by quitting smoking to fulfill other needs like food, education and health of their children, and paying utility bills.

Says one in 94 smokers quitting smoking due to high cost of cigarettes

The tobacco industry is causing a loss of around 620 billion rupees to the national exchequer in terms of diseases like cancer, chronic respiratory diseases, and cardiovascular disease, besides causing 337,500 deaths every year.

The multinationals claim that share of illicit cigarettes was recorded around 40 to 42pc in the market, though the ground surveys suggest their number was not more than 18pc, the study said, adding that companies could not hide behind illicit and illegal cigarettes just to evade taxes and boost profits by selling cheap cigarettes.

On the other hand, Pakistan Customs officials believe that in the 18pc illicit cigarettes, share of smuggled cigarettes was significant which could be overcome easily through better border management.

The study further said smuggling of multinational companies’ cigarettes in the local market remained a major concern for the federal authorities as this would largely remain out of the tax circle.

The companies were trying to make up their loss in profit with increase in taxes on cigarettes through the sale of their smuggled brands on cheaper rates in the local Pakistani market, it added.

Published in Dawn, May 22nd, 2023

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