Health activists have warned the government to be cautious of the deceptive tactics of the tobacco industry which causes huge losses to the national treasury every year.
At an event organized by the Society for the Protection of the Rights of the Child (SPARC) in collaboration with Social Policy and Development Centre (SPDC), health activists presented official statistics of cigarettes produced by the tobacco industry in Pakistan to show that, in most cases, official production in June is below average. The official production dropped from 4,006 million sticks in February 2023 to 2,665 million sticks in March 2023. Health activists said that these are the industry’s tactics to sway policymakers. Because if this drop is due to a higher tax rate, then why did production drop from 4,510 in June 2022 to only 1,021 in July 2022 when tax was not increased.
Muhammad Sabir, Principal Economist of SPDC, said that along with the tax rate increases, cigarette prices have also gone up. The per-pack price of the most popular economy brand went up from PKR 80 to PKR 211, while the price of a premium brand increased from PKR 179 to PKR 483. In percentage terms, the overall price increase was 164 per cent and 170 per cent, respectively. However, cigarette manufacturers have also continued to increase their net-of-tax prices (producers’ prices). For example, the producers’ price of the economy brand rose by 121 percent, much higher than the current inflation rate. In total, the tax on economy brands (FED and GST) increased by PKR 89 per pack (from PKR 45 to PKR 133). On the other hand, the consumer price rose by PKR 131. Due to over-shifting, the excise tax share in retail price stays at 51.6%, lower than the widely-accepted standard of 70%.
Malik Imran, Country head of Campaign for Tobacco-Free Kids (CTFK) stated, that the tobacco industry has always attempted to undermine government’s efforts of reducing tobacco harms by using the illicit trade excuse. Illicit trade is a fact but it is exaggerated by the tobacco industry. In fact, the tobacco industry practices underreporting where they conceal their actual production figures to evade taxes. Cigarette manufacturers also transfer the tax burden to consumers to boost their own profits. Imran cited an example that, the official production in July 2022 was reduced to only 1.02 billion from 4.5 billion sticks in June 2022. He said that even with the lower production, the government is expected to generate extra revenue of over 10 billion rupees due to higher tax rates. Therefore, the policy of increasing tax rates should be maintained.
Khalil Ahmed Dogar, Program Manager SPARC said that tobacco is causing a pandemic that kills 465 people and makes 1200 children addicted every day. Tobacco Control efforts need bold steps and the government’s decision to raise tobacco prices is a much-required and commendable step. This decision has already benefited the economy and it will generate more revenue as well as reduce health burden. However, to achieve this double benefit, the government must be firm by not falling for the tobacco industry’s false campaign.
