ISLAMABAD: A proposal is being considered to increase the cigarette prices by increasing federal excise duty (FED) amid the suggestions forwarded by the Tobacco Control Cell (TCC) and non-governmental organisations (NGOs).
Sources in the Ministry of National Health Services Regulations and Coordination say the proposal has been formulated by the TCC after the NGOs pushed for raising the FED by 26.6 per cent.
As a result, the federal ministry is now deliberating upon the suggestion at a time when Pakistan remains focused on increasing revenue collection amid a dismal tax-to-GDP ratio. However, the move would be another addition to the indirect taxes, but is certainly going to please the IMF (International Monetary Fund).
Last week, a team left Islamabad after holding talks with Pakistan, as the country is hoping for another IMF programme to the tune of $6 billion to $8 billion over a period to three to four years.
It is worth noting that the cigarette prices are much higher in the rest of the world, especially in developed countries, with a view to discourage tobacco consumption and reduce the health expenditure due to the a plethora of diseases caused by smoking.
The sources say the FED on cigarette may be hiked by 15pc to 19pc after the government fixed the minimum price of locally-made brands at Rs127 inclusive of all taxes.
Currently, the government is earning at least Rs120 per packet in FED.
According to the sources, the local tobacco companies had paid Rs173 billion in taxes during the past fiscal year. However, the losses caused by tax evasion is estimated much higher – around Rs240bn.
However, there are side effects as well. Any increase in FED to encourage the people to opt for smuggled cigarette brands – a trend already being witnessed ever since the cigarette prices were increased.
