ISLAMABAD—The International Monetary Fund (IMF) has urged the “need to limit tax incentives to cases where their economic benefits, such as employment generation and value addition to the economy, outweigh the costs to the budget.”
This is a meaningful proposal as Pakistan seeks a new bailout package ranging from $6 to $8 billion under the Extended Fund Facility (EFF). Capital Calling, an Islamabad-based think tank, has pointed out that cigarette manufacturing is one of the messiest sectors where tax reforms are needed immediately.
Speaking at a discussion by a group of researchers, Dr Hassan Shehzad, from the International Islamic University Islamabad (IIUI), commented that the cigarette manufacturing industry’s contribution to employment generation or value addition to the economy is negligible.
On the other hand, it accounts for “over 163,600 people each year in Pakistan. Almost 31,000 of these deaths are due to exposure to second-hand smoke. Tobacco causes about 16.0% of all male deaths and 4.9% of female deaths. Overall, 10.9% of all deaths are caused by tobacco.”
Dr Muhammad Zaman, head of Zaman Research Centre (ZRC), Quaid-i-Azam University (QAU), said that there is evidence that tobacco consumption declines when its price increases, as it becomes out of the reach of many users.
“Higher taxes on tobacco could reduce consumption in South Asia by at least one-third and avoid 35-45 million premature deaths, concludes an analysis published today in The British Medical Journal,” said Dr Zaman, quoting a research report.
He said that the IMF’s recommendations for a uniform tax on cigarettes, regardless of their local or foreign brands, are praiseworthy and should be implemented forthwith. He said that cigarette companies have been trying to build a media narrative against higher tobacco taxes, which is amusing as cigarette prices are the lowest in Pakistan compared to our region.
“The point is,” he said, “that no amount of verbatim can change the fact that cigarettes are harmful to health and that Pakistan has become a haven for cigarette makers because of the flaws in the tax system, many of whom have been pointed out by the IMF. The flaws have to be ironed out of the system. The sooner, the better.”
