ISLAMABAD: The Federal Board of Revenue (FBR) introduction of third slab of the federal excise duty has increased consumption of tobacco in the country.
The Senate Standing Committee of National Health Services was briefed on how the introduction of third tier by the FBR actually benefited the multinational companies. The Project Manager of Tobacco Control Cell Muhammad Javed said that Pakistan Tobacco Company (PTC) and Philip Morris had presented conflicting figures officially due to illicit trade of cigarettes.
However, he added, before introduction of the 3rd slab in May, the companies earned profits due to increased consumption .
The prices of cigarettes brands were increased in 2013-16 in two slabs as Pakistan was signatory of World Health Organisation (WHO) Framework Convention on Tobacco Control. However, in May, the FBR introduced the third slab after the multinational companies reported decline in their production and the government collected less revenue from the industry.
The rate of federal excise duty on the first tier of cigarettes is Rs3705 per 1,000 cigarettes while Rs1,649 per 1,000 cigarettes in the 2nd tier.
As per the FBR documents, gradual increase in the FED on cigarettes took prices to a point where the legitimate industry could not absorb further hike. As a result, volume of the legitimate industry was captured by low-quality and non-duty-paid cigarettes, which also resulted in substantial decline in the government revenue.
Before introduction of the third slab, revenue from tobacco industry stood at Rs88.40 billion in 2013-14, Rs102.88 billion in 2014-15, Rs114.19 billion in 2015-16 and Rs83.69 billion in 2016-17.
The FBR documents reveal that to tackle the menace of illicit, non-duty-paid cigarettes, a third tier was introduced under which an FED of Rs800 was payable per thousand cigarettes, i.e. Rs16 per pack of twenty cigarettes with sales tax at approximately Rs6.98 per pack.
This third tier enabled the legitimate cigarette industry to price their lowest brands at approximately Rs47 to Rs48 per pack of twenty cigarettes.
Meanwhile, the FBR documents further reveal that after introduction of the third slab, FED payments by two leading cigarette manufacturers improved, the companies holding 96 per cent share in legitimate cigarette industry.
The net payment of sales tax and FED increased by approximately eleven per cent from Rs20,404 million to Rs22,623 million during the corresponding year, said the documents.
Secretary NHS Naveed Kamran Baloch informed the senate body that number of tobacco consumers in Pakistan was 25 million and more than 10 million were cigarette smokers. He said that above 100,000 people died every year because of tobacco consumption and everyday 1,200 children of teenage started smoking.
