Health minister requests review of tobacco taxation structure

ISLAMABAD: Minister for National Health Services, Regulations and Coordination Aamir Mehmood Kiani has recommended to the Ministry of Finance to withdraw third slab of Federal Excise Duty (FED) on cigarettes introduced in Federal Budget 2017-18 which resulted in increase in cigarette production.

In a letter written to Federal Minister for Finance, Revenue and Economic Affairs Asad Umar, the health minister has informed that after introduction of third slab in 2017, the local production of cigarettes is increased by 77 percent compared to production in previous year.

Last week, health minister had announced to coordinate with Ministry of Finance to raise taxes on tobacco products. The letter stated that as a signatory to Framework Convention on Tobacco Control (FCTC), Pakistan has to implement tax and price policies on tobacco products as a way to reduce tobacco consumption. Moreover, Pakistan is obligated to achieve the targets set in Sustainable Development Goals (SDGs).

Prior to Federal Budget 2017-18, the ministry of National Health Services proposed to tax the lower slab or tier of all brands of cigarettes at Rs44 per pack of 20 cigarettes.

The proposal was based on a study, according to which, a uniform specific excise tax that accounts for Rs44 per pack of 20 cigarettes could reduce number of smokers by 13.2 percent, increase tax revenues by Rs39.5 billion, leading to reduction of 0.65 million premature deaths caused by smoking among current smokers, while also preventing 2.55 million youth from taking up smoking.

In Finance Act, 2017 a new slab/tier with reduction in FED (Rs16) was created in Finance Act, 2017, which resulted in decrease in prices of the most sold brands. Prior to Federal Budget 2017-18, the ministry requested the FBR to withdraw third slab or tier as it resulted in increasing production of cigarettes.

In addition, it was proposed to impose a levy with the name of “Health Levy on Cigarettes”, but it could not become part of Finance Act.