Tobacco Industry Underreporting Production To Avoid Taxes, Claim Experts

Propose an increase in taxes on cigarettes that can improve government revenues to an estimated Rs336 billion, up from the current level of Rs240 billion

Tobacco Industry Underreporting Production To Avoid Taxes, Claim Experts

Islamabad – June 01, 2024: Health advocates have proposed a 37% increase in taxes on tobacco products in Pakistan to reduce consumption, increase revenue and bridge the gap in health costs associated with smoking.

 This proposed increase would translate into a substantial rise in government revenue, estimated to reach Rs 336 billion from the current Rs 240 billion. The intervention would also significantly impact health costs associated with smoking, projected to be reduced from Rs 615 billion to Rs 418.2 billion, effectively reducing the gap between revenue and health costs to Rs 82 billion.

Malik Imran Ahmad, Country Representative Campaign for Tobacco Free Kids (CTFK) said that the effectiveness of high tobacco taxation as a vital measure in combating tobacco consumption, as advocated by the World Health Organization (WHO). The industry can absorb at least a 40% increase in taxes, and the IMF and World Bank have recommended Pakistan introduce a single-tier tax structure for cigarettes. Despite efforts to increase taxes, low cigarette prices persist, contributing to sustained high consumption levels. By adopting these reforms, Pakistan can make cigarette taxation more effective and align it more closely with international best practices.

Imran said that the illicit market share is exaggerated by multinational companies. The industry has been found to underreport production to evade taxes, violating tax laws and prioritizing profits over public health.
Mehboob Ul Haq, Chief Executive Officer at the Human Development Foundation (HDF), 
underscored the immense benefits of boosting tobacco taxation, stating, “Tobacco taxation is a globally recognized and effective tool to reduce affordability and consumption.” He stressed the urgent need for stringent regulation of all tobacco products, reaffirming HDF's steadfast commitment to forging a healthier and more prosperous Pakistan, where the well-being of our youth is paramount. 

Muhammad Asif Iqbal, Managing Director of the Social Policy and Development Centre (SPDC) said smokers’ response to price changes suggests an enormous potential for taxation to discourage smoking in Pakistan. As a result of the recent hike in the FED on cigarettes and the corresponding increase in prices, cigarette consumption has declined by 19.2%. He was presenting preliminary results of a nation-wide survey of over 5,000 smokers conducted by SPDC.