Tier III taxation promoting tobacco consumption: Survey

  A survey conducted by the Centre for Social Education and Development (CSED), titled ‘Impact of Price Increase/Decrease over Tobacco Consumption’, show that the recent introduction of Tier III taxation which has resulted in price decrease of some premium brands has actually led to an increase in tobacco consumption, which kills approximately 108,800 people annually in Pakistan.

The survey included general interviews which were conducted randomly with smokers in different areas of Islamabad and Rawalpindi. An overwhelming majority of participants (59 per cent) confirmed that the recent introduction of Tier III taxation had actually resulted in the increase of tobacco consumption.

Cigarette prices have increased elsewhere in the world to discourage smoking and save lives from dangerous diseases caused by smoking. However, Pakistan was the only country where cigarette prices of premium brands were reduced by 33.33 per cent in the 2017-18 budget.

In fact, this was a breach of World Health Organisation (WHO) Framework Convention on Tobacco Control (FCTC), of which Pakistan is a signatory. The FCTC specifically identified that increasing the price of tobacco products was a way to discourage its consumption and keep the youth away from smoking.

The survey revealed that 63 per cent of the total respondents believed that an increase in prices would decrease their tobacco consumption on a daily basis. Around 25 per cent of respondents could not decide, while 12 percent respondents did not care about the increase in the prices of tobacco items.

Similarly, a total of 59 per cent respondents said that a decrease in the prices of cigarettes after introduction of Tier III had actually increased their daily consumption, while 27 per cent respondents answered in the negative, and 14 per cent were gave a neutral answer.

The survey findings suggested a strong co-relation between prices of products and tobacco consumption. Hence, in order to control tobacco consumption, the government needed to increase taxes on tobacco products.

The government needed to make it a cornerstone for any future tobacco/cigarettes control policy which was in line with WHO regulations. This could only be achieved if the Federal Board of Revenue (FBR) came out of its tobacco tax “addiction”.

The report findings also revealed that the National Health Services Minister Saira Afzal Tarar suggested increasing Federal Excise Duty (FED) on the lower slab, Tier II, of all brands of cigarettes to Rs 44 per pack of 20 cigarettes in 2017-18 budget to reduce tobacco consumption. However, Tier III was introduced by the FBR in the Finance Bill 2017 to increase revenues.

However, within weeks the decision proved disastrous, as multinationals started manipulating it by lowering prices of its most saleable products placed in Tier II prior to the introduction of the Finance Bill 2017 to fit them in tier III. Now instead of paying a tax at the rate of Rs 33.4 per pack of 20, cigarette manufacturers were now paying only Rs 16 per pack of 20 cigarettes.

In case the FBR achieved the revenue target, yet the government needed to look at the health aspect of the tobacco sales, since official measures in this regard could prevent thousands of deaths per year.

According to WHO, tobacco killed over seven million people every year, out of which 108,800 people died in Pakistan.

The government need to understand that the revenue of Rs 75 billion it generated from the tobacco industry every year was far less than over Rs 100 billion that the public spent on treating diseases caused by smoking.

According to the report, funded by Bloomberg Philanthropies and Bill and Melina Gates Foundation, “Pakistan has one of the largest populations of tobacco users in the world, with over 22 million adults aged 18 or older smoking tobacco products. Almost one-third (32.4 per cent) of men and 5.7 per cent of women smoked tobacco, while 15.9 per cent of adults were regular smokers.

The survey findings showed that increase in tobacco prices every year increased revenues from cigarette industry all over the world, while this price reduction step would cost approximately Rs 33 billion in comparison to last year, with approximately Rs 30 billion additional loss for not increasing prices suggested by the health ministry. Due to this, the total accumulative loss could reach approximately Rs 60 billion.