Pakistan

The Tussle with Tobacco: A Tale of Taxation and Trade in Pakistan

The Economics of Tobacco and its Impact on Pakistan

In the bustling metropolis of Lahore, a gathering of eminent personalities sought to shed light on the challenging dynamics of tobacco economics in Pakistan. The Society for the Protection of the Rights of the Child (SPARC), in collaboration with the Federal Board of Revenue (FBR) and Elected Representatives, led this eye-opening event. The discourse focused on the health cost burden imposed by tobacco and the industry’s tactics, especially in the context of FBR’s track and trace system.

Malik Imran, Country Head of the Campaign for Tobacco-Free Kids (CTFK), put forth a staggering figure: the tobacco industry imposes an economic burden of 615 billion rupees on the nation. This astounding amount illustrates the necessity for consistent and heavy taxation of the industry. The government’s decision to increase the Federal Excise Duty (FED) on cigarettes in February 2023 had a significant impact. This move led to an additional 11.3 billion FED revenue and 4.4 billion VAT revenue for the fiscal year 2022-23, contributing 0.201% to the GDP – a considerable boost for an economy striving to overcome challenges.

The Illicit Trade Excuse and Industry Tactics

Imran highlighted an interesting perspective: the tobacco industry often uses illicit trade as an excuse to avoid taxes. However, the reality presents a different picture. Underreporting and shifting the tax burden to consumers are common practices in the industry. These tactics allow manufacturers to safeguard their profitability at the expense of the consumers and the nation’s economy.

The Role of the Track and Trace System

Mr. Rizwan Sarfraz, Additional Project Director, Track and Trace System, FBR, provided insight into the effectiveness of the Track and Trace System (TTS). This technology-driven monitoring system has increased transparency and improved tax compliance. Moreover, it has curbed the prevalence of counterfeit goods in the country. The TTS’s achievements are noteworthy: despite a 6.5% decrease in cigarette production from July-December 2021 to July-December 2022, the FBR’s tax collection improved by 11.75% during the same period.

The Call for Unified Action

Nisar Ahmed Cheema, Member National Assembly, emphasized the need for all stakeholders to prioritize public health. He called for implementing FBR’s track and trace system across all companies to prevent loss of tax revenue. Moreover, he urged fellow parliamentarians to advocate for consistent and adequate increases in tobacco taxation.

Dr. Ziauddin Islam, Former Technical Head of the Tobacco Control Cell, Ministry of Health, highlighted the devastating impact of tobacco on public health. With 337,500 annual deaths attributable to tobacco and a 615 billion rupee economic burden, he asserted the need for sustainable measures, including regular increases in tobacco taxes, to reduce consumption and generate revenue.

Protecting the Young: A Shared Responsibility

Khalil Ahmed Dogar, Program Manager SPARC, made a compelling appeal: to safeguard children from the harms of tobacco, all stakeholders must put their differences aside and unite. The tobacco industry’s substantial loss to the national exchequer underscores the urgency of this issue. Increasing tobacco taxes is a step in the right direction, but it must be implemented consistently.

Analyzing the Situation and Looking Forward

The current situation presents a significant dilemma. While contributing to the economy in terms of revenue, the tobacco industry also imposes a substantial economic and health burden. The solution lies in multifaceted and persistent efforts. Consistent increases in tobacco taxation, robust monitoring systems like TTS, and widespread awareness of the industry’s tactics are crucial.

Furthermore, to the existing strategies, additional effective approaches can be adopted. The World Health Organization’s MPOWER initiative offers a comprehensive plan that includes monitoring tobacco use and prevention policies, protecting people from tobacco smoke, offering help to quit smoking, warning about the dangers of tobacco, enforcing bans on tobacco advertising, promotion, and sponsorship, and raising taxes on tobacco.

Schools can play a pivotal role in tobacco control. While traditional school-based prevention programs have not shown long-term effectiveness in curbing youth smoking, innovative strategies could make a difference. Schools can leverage tobacco-related issues to teach critical thinking, covering topics such as the science of addiction, the effects of second-hand smoke, the role of marketing in selling cigarettes, and the politics of protecting the tobacco industry. This approach could help students understand tobacco use’s broader societal and economic implications. In addition, creating smoke-free environments in schools and other places where adolescents spend their time can reduce the likelihood of youth smoking by approximately 25%. Banning advertising and promotion of tobacco products also decreases tobacco use among adolescents.

The journey towards a tobacco-free Pakistan requires unwavering commitment from all stakeholders. Government intervention, industry regulation, public awareness, and institutional change can steer the nation toward a healthier future. The challenge is complex, but so too are the solutions. By prioritizing health over profits and equipping the next generation with the knowledge and support they need to reject tobacco, Pakistan can forge a new path forward in the fight against the tobacco epidemic.

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