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Under Reporting by Tobacco Industry Costs Exchequer Loss Worth Billions, Experts

HealthUnder Reporting by Tobacco Industry Costs Exchequer Loss Worth Billions, Experts
By: Our Correspondent

Islamabad: January 10, 2020 – Tobacco industry is causing heavy losses to exchequer by under reporting and manipulating facts, government is spending 200 billion rupees every year on tobacco related diseases whereas the earning in the form of taxes from tobacco industry is not more than 110 billion rupees a year, said speakers during a session titled “loss of revenue because of deceptive tactics of tobacco industry” in Islamabad.

The session attended by anti tobacco campaigners, experts and journalists, was jointly organised by Society for the Protection of the Rights of the Child (SPARC), Human Development Foundation (HDF) and Pakistan National Heart Association (PANHA).

Addressing to participants Malik Imran Ahmad from Campaign for Tobacco Free Kids, Pakistan office, said big tobacco industry caused a whopping Rs153 billion loss to the national exchequer from 2016 to 2019 by being awarded low tax rate and adjusting the prices of their most sold brands.

He further added that after the introduction of the third tier, around 160 billion cigarettes were produced between May 2017 and March 2019. Big tobacco companies share 75% of the total market, which means they were able to sell 120 billion cigarettes in the same period. Loss of revenue due to the introduction of the third tier (low tobacco taxes) is Rs77.85 billion from 2016 to 2019. Loss of Revenue due to Price Adjustments is Rs75 billion from 2018 to 2019.

Local manufactures of cigarettes have their representation in the Senate and National Assembly and big companies even approach the Prime Minister to plead their case regarding taxation on tobacco products, Malik said.

Mr. Waseem Saleem, Senior Economist, Social Policy and Development Centre (SPDC) said that the large fiscal imbalances in Pakistan require greater tax revenues. Tobacco taxation can positively contribute to government revenues. Simultaneously, these taxes will also help promote public health objectives.

He added that the level of under-reporting of cigarette production in Pakistan has significant negative implications for government tax revenue. Revenue loss due to undeclared production is estimated to be Rs 31 billion while by including GST revenue, it becomes Rs 37 billion (considering the average FED rate of Rs 1.93 per cigarette in 2016-17, calculated by dividing total revenue by the volume of sales).

He also added that the volume of illicit trade is very low as compared to the claims made by the tobacco industry. He further added that the annual economic cost of smoking in Pakistan is as high as Rs143.208 billion.

The session was followed by an interactive question answer session that revealed many alarming facts about deceptive tactics of tobacco industry regarding loss of revenue.

Health advocates urged the government to increase the rate of tax on cigarette manufacturers in the upcoming budget for fiscal year 2020-2021.

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