Smoking units drain Rs567bn potential revenue in seven years

ISLAMABAD – The substantial influence of Pakistan’s smoking-related industry on policymaking has not only negatively affected the nation’s financial well-being and public health but has also led to a staggering loss of Rs 567 billion in revenue over the last decade.
The alarming loss of revenue was unearthed through a comprehensive study delving into the dynamics of the cigarette sector and scrutinizing Federal Board of Revenue (FBR) data by the SDPI.

According to a study by the Pakistan Institute of Development Economics (PIDE), the total costs attributable to smoking-related diseases and deaths in Pakistan for 2019 reached an additional Rs 615.07 billion ($3.85 billion), with indirect costs (morbidity and mortality), making up 70% of the total cost.

However, the cigarette industry managed to influence decision-making, which not only resulted in a Rs 567 billion loss in potential revenue but also put an extra burden on the country’s fragile healthcare system, the SDPI study reveals.
In its report titled “Pakistan: Overview of Tobacco Use, Tobacco Control Legislation, and Taxation”, the World Bank has also revealed that the decline in government revenue in the 2016-2017 fiscal year was carefully planned by the robust cigarette industry.
The study brings attention to the influence of multinational companies and the introduction of a three-tier excise duty structure, raising concerns about tax evasion and its adverse effects on public health.

The intricate examination of associated factors indicates that safeguarding revenue streams while prioritizing public health requires careful reevaluation of tax policies.
The World Health Organization (WHO) emphasizes the need to safeguard tobacco tax policies from the vested interests of cigarette companies for the effective development, implementation, and enforcement of public health initiatives. However, the study said it did not happen in Pakistan.The study also highlighted how high and middle-income countries successfully imposed high taxes on cigarette products to decrease consumption and increase government revenues. However, the fact remains that Pakistan still lacks a clear strategy for using cigarette taxation and prices as a public health tool.According to the study, the National Accountability Bureau (NAB), the Senate Special Committee, and the Auditor General of Pakistan Revenue (AGPR) have also endorsed the challenges posed by the multinational cigarette industry.
The cigarette industry in Pakistan is dominated by two multinational companies that sell household brands across Pakistan, which gives them immense control and influence over policymakers. The multinationals have long been blamed for forcing the government to rely on questionable data on the cigarette market.

As the nation grapples with these alarming findings, experts suggest that implementing high cigarette taxes can serve as a proactive measure in promoting public health and simultaneously bolstering the nation’s economic well-being, the SDPI said.