The Special Assistant to the prime minister on revenue, Haroon Akhtar Khan hinted that taxes on cigarettes might decrease in the upcoming budget.

In an exclusive interview with DawnNews Akhtar pointed out how the smuggling of cigarettes posed a new challenge for the government as the illicit underground tobacco industry cost the exchequer Rs40 billion in taxes.

Cigarette products, along with other demerit goods, are often heavily taxed by governments in an effort to discourage their consumption.

Last year, Minister for National Health Services Saira Afzal Tarar campaigned to implement the tax and price policies on tobacco products in the 2016-17 budget as recommended by the World Health Organisation (WHO).

Tarar proposed that 2pc of the tobacco tax revenue should be allocated for Prime Minister’s National Health Programme (PMNHP) for the treatment of diseases spread by the use of tobacco. She added that the imposition of the tax would increase the revenue by Rs39.5 billion.

“Tobacco taxes that translate into price increases are considered the single most effective option for reducing tobacco use and increasing revenues. Higher tobacco taxes save money by reducing tobacco-related health care costs, including medical expenses,” she said.

Explore: Higher tax on tobacco will improve both physical and financial health

However, the increase in taxes on cigarettes last year was deemed 'small enough to be negligible' despite efforts by the national health services (NHS) ministry to increase taxation on cigarettes

'Tax theft greater than tax collection'

In the interview, Akhtar said the government collects Rs3.5 trillion taxes annually but the tax evasion taking place is bigger than the revenue collected.

“It is unfortunate that a doctor that earns Rs60 million annually shows that he earns Rs600,000 only. Or a hospital earning Rs350m a year shows less than Rs3.5m,” he explained.

Khan said tax theft was a huge challenge for the government noting that if the menace is brought under control, Pakistan will be one of the richest countries in the world.

“The government will reduce the tax on general sales tax (GST) from 17 percent to a single digit if tax theft is controlled,” he continued.

But the special assistant to Prime Minister, however, seemed determined in a bid to discourage massive tax evasion, warning, “We will make the lives of non-tax filers miserable if they don’t register themselves as tax filers”.

He said withholding tax for non-tax filers will be increased so that they are brought into the tax net.

Talking about the upcoming fiscal budget, Khan said there is no proposal to impose new taxes.

He said the government is poised to increase the number of tax filers to 1.5 million till the next general elections scheduled to be held in 2018.

To a question, Khan said the government was also faced with a strong demand from the business community about launching amnesty schemes for the owners of offshore companies adding the government was mulling over the demand.

He argued in favour of the proposal, saying that many countries ─ including Indonesia and India ─ have launched amnesty schemes for owners of offshore companies.

To another question, the special assistant to Prime Minister said the tax exemption available to judges of the apex judiciary and armed forces would continue as both have rendered great sacrifices for the country.

“A soldier who is ready to offer his life for the homeland should be exempted from taxes. Similarly, the tax exemption offered to judges has improved the performance of judiciary,” he said.

Commenting on dwindling exports, Khan explained that Pakistan’s exports have reduced because of the international recession, adding that exports of China and India have also suffered because of this factor.

“But we maintained the stability of our currency despite the international recession. We will maintain the incentives for agriculture and industry in the incoming budget,” Mr Khan said