ISLAMABAD: Experts including economists, foreign experts and tax officials have proposed a high uniform specific cigarette excise tax in the forthcoming budget 2014-15 to discourage the use of tobacco.
Addressing the launching of a report titled “The Economics of Tobacco and Tobacco Taxation in Pakistan,” the speakers recommended a high uniform specific cigarette excise tax, as the move would significantly raise cigarette price and would reduce tobacco use.
The ceremony was addressed by Coalition for Tobacco Control National Coordinator Khurram Hashmi, WHO National Programme Officer Shahzad Alam, Technical Officer Dr Fouad Asalm and Society for Alternative Media and Research Executive Director Mazhar Arif. The report is a joint effort of leading economists, foreign experts and input of tax officials on tobacco taxation.
The cigarette tax structure in Pakistan is complicated, with a tiered structure that imposes different excise taxes based on retail cigarette prices. Until 2013, the system was comprised of a specific tax applied to low priced cigarettes, an ad valorem tax levied on high priced cigarettes, and a combination of specific and ad valorem taxes applied to mid-priced cigarettes. The tax system was simplified in the 2013-14 budget – ad valorem taxes were eliminated and three tiers were collapsed into two, although the gap in tax between the lower and the higher tier is still substantial.
Cigarette excise taxes in Pakistan account for just over half of final cigarette prices paid by consumers on average, while total taxes on cigarettes account for almost two-thirds of final prices. This is below the level in countries that have taken a comprehensive approach to reducing tobacco use, where taxes account for 70 percent or more of price, and the excise tax share is below the 70 percent level recommended by the World Health Organisation, the report said.
According to the report, replacing Pakistan’s tiered excise tax structure with a uniform specific tax on all cigarettes would eliminate opportunities for tax avoidance through misclassification or repositioning of brands and send the clear message that all cigarettes are equally harmful, while reducing the incentives for substitution to less expensive cigarettes in response to a tax increase.
