Tobacco consumption putting burden of Rs615bn/annum on exchequer – Pakistan

ISLAMABAD: The tobacco consumption is levying a burden of Rs615 billion per annum on the national exchequer in terms of economic and health costs as the smoking-attributable direct cost is 8.3 percent of the total country’s health expenditure.

Anti-smoking experts said this in a virtual launch of “Tobacco Tax Reforms Model in light of Health Cost Burden” by the Society for Protection of Rights of the Child (SPARC), here on Wednesday.

They said tobacco annihilated 1.6 percent of GDP every year-taking out Rs615 billion from the economy as health cost.

Addressing the participants, Malik Imran Ahmad, country head Campaign for Tobacco Free Kids (CTFK) stated that the smoking-attributable direct cost was 8.3 percent of the total health expenditures, which amounted to 1.6 percent of Pakistan’s GDP.

In comparison, the total tax contribution of tobacco industry (120 billion in 2019) is only around 20 percent of the total cost of smoking.

He further added that the current tax structure enabled the tobacco industry to sell cheaper cigarettes.

Considering the economic and health costs of tobacco consumption, an increase of four to five times the current tax rate is strongly recommended. However, as a start, it is imperative that the Federal Board of Revenue (FBR) raises excise taxes to meet the WHO’s recommended threshold of 70 percent of the retail price of a cigarette pack.

He further added that the FBR must narrow the tobacco industry’s tax maneuvering space by progressively moving to a single-tier taxation system. These reforms will effectively reduce tobacco affordability and save millions of youths from being trapped into an expensive life-long loyalty. Dr Nausheen Hamid, Parliamentary Secretary for Ministry of National Health Services, Regulation and Coordination, shared that 30 million adults (age 15 plus) or about 19.1 percent of adults, currently, used tobacco in Pakistan.

This consumption is the leading cause of deaths due to cancers, chronic respiratory diseases, and cardiovascular diseases. She shared the alarming statistic that in 2017, tobacco use killed an estimated 170,000 people.

Khalil Ahmed, Program Manager, SPARC, shared the low prices of tobacco products make them affordable for youth that cigarette prices in Pakistan were among the lowest in the world.

The average excise tax share of 45.4 percent of the retail price is much lower than the WHO recommendation that excise tax should be at least 70 percent of the retail price.

Currently, the effective excise tax rate on cigarettes is still the same as it was five years ago due to no change in the federal excise tax and increases in nominal income and inflation.

Due to such easy affordability, around 1,200 children between the ages of six and 15 start smoking in Pakistan every day.

Sana Ullah Ghuman, Secretary General, Pakistan National Heart Association (PANAH), said it was about time the policy makers realised that the economic and health cost of tobacco consumption was higher than Pakistan’s total yearly public health spending.

Adopting the tobacco tax reforms model will result in 219,000 fewer smokers; 3.8 percent reduction in smoking prevalence among adults; 6.4 percent reduction in smoking intensity among adults; and Rs19 billion in additional total tax revenue.

Copyright Business Recorder, 2021

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