The International Monetary Fund (IMF) recently suggested a consistent tax plan for the tobacco industry to address Pakistan’s substantial economic losses. These losses stem from the industry’s dominance, high consumption rates, and resulting health expenses.
In its report, the IMF stresses the importance of implementing uniform taxation on cigarettes to tackle health issues and maximize revenue.
Following tax increases on tobacco products, cigarette consumption has dropped by 20-25%, prompting the IMF to suggest similar taxation for e-cigarettes due to comparable health risks.
Health advocates support the IMF’s proposals, emphasizing the need to restructure tobacco taxation in Pakistan.
The Sustainable Development Policy Institute (SDPI) previously highlighted flaws in the tax collection system, indicating a revenue loss of Rs 567 billion over seven years.
Former federal Minister for National Health Services, Dr. Nadeem Jan, calls for a 50% tax hike on tobacco products to discourage consumption, especially among youth, in line with the WHO Framework Convention on Tobacco Control.
Pakistan’s adherence to the Framework Convention on Tobacco Control (FCTC) emphasizes the necessity of a consistent pricing system for cigarettes to regulate the industry and deter consumption effectively.
The World Health Organization (WHO) advocates for substantial tax measures to reduce tobacco use, citing a 10% price increase leading to a 4% decrease in consumption in high-income countries and up to 8% in low- and middle-income countries.
A study by the Pakistan Institute of Development Economics (PIDE) reveals the significant costs of smoking-related diseases and deaths, amounting to Rs 615.07 billion ($3.85 billion) in 2019, equivalent to 1.6% of GDP.
The Pakistani government’s recent decision to raise the Federal Excise Duty (FED) on cigarettes has resulted in increased revenue and reduced smoking rates. A World Bank report suggests extending the current tax rate from premium to standard cigarettes for enhanced revenue.
Malik Imran Ahmed, Country Head of Campaign for Tobacco Free Kids (CTFK), urges policymakers to heed the IMF’s advice and implement comprehensive tax reforms to safeguard public health and strengthen fiscal stability.
The IMF has referenced a study by Capital Calling, an Islamabad-based think tank, to finalize recommendations for tax reforms.
