Islamabad:Tax policy on tobacco consumption is yet to achieve its goals, contrasting with successful efforts seen in other parts of the world through high taxation. It is because of the myth prevailing among policymakers that increasing taxes would hinder the revenue of the tobacco industry.
Reports of groups of health activists run counter to this myth stating that in 2019, when the government tightened tax policies, the industry’s tax contribution increased to Rs120 billion compared to Rs92 billion in 2016. Additionally, the tobacco industry’s share of total tax collection rose from 2.15 per cent to 3 per cent in FY16.
Malik Imran, an anti-tobacco activist, has consistently been making it clear that increasing tobacco taxes leads to a reduction in tobacco consumption. Despite this empirical evidence, taxation policy remains weak in its battle against tobacco.
A network of academic researchers and professionals, believes that this reluctance to effectively utilize tax policy to curb tobacco consumption may be attributed to the absence of a reliable estimate of the true economic costs of smoking.
Multinational tobacco companies have been claiming that tax increases would adversely impact their businesses and potentially force them to shut down production facilities. Consequently, the rise in the Federal Excise Duty (FED) has fuelled the growth of the illicit market, which now holds a 40 to 42 per cent market share.
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