ISLAMABAD: While the health ministry has proposed that the Federal Excise Duty on cigarettes be increased by 20 per cent, the World Health Organisation (WHO) has demanded it should be increased by 37 per cent to take the tax share of retail prices to 70 per cent as per international standards.

The tax proposal presented to the health ministry by various anti-tobacco activists includes recommendations of WHO that highlight that raising taxes on cigarettes would not only reduce burden on health care system but also help enhance revenue generation.

According to the tax proposal maintaining the current FED rate might result in a decrease in health recovery and to achieve similar health cost recovery levels observed in 2023-24, an increase of 37pc in FED rate for the upcoming year would help generate additional Rs60 billion in GST from cigarettes for 2023-24.

The tax proposal also rejected the argument that tax increase promote illicit trade and referred to researches showing that tobacco firms manipulate their reported production to influence tax policy.

Regarding the cost of tobacco consumption on health care system it has been highlighted that 31.6 million adults currently use tobacco in the country and it results in more than 160,000 deaths every year, while smoking-related illnesses and deaths cost the country at least 1.4pc of its GDP annually.

Revenue collections from July 2023 to January 2024 reached Rs122 billion, with full year estimates exceeding Rs200 billion.

The tax proposal demands that raising taxes on tobacco products would help save lives and for the next fiscal year 2024-25, the government should consider embedding the cost recovery in tobacco tax policy through automatic adjustments to excise taxes, ensuring that they cover a certain percentage of the total health costs attributable to smoking.

Published in Dawn, May 11th, 2024