Tobacco taxation – win for public health, a win for revenue

Tobacco taxation – win for public health, a win for revenue, and a win for the economy overall. Taking its nod from Sri Lanka, Pakistan is routing on the way to bankruptcy amidst a highly charged political atmosphere & economic crunch, the country ever faces.

The total External Debt for Pakistan is 32.74536 US $. Pakistan has sought to increase in size and duration of its $6bn International Monetary Fund program funding to help ease difficulties in financing as a new government stepped in. Pakistan also borrowed a total of $9.2 billion from China, KSA, and UAE.

Earlier Kingdom of Saudi Arabia gave Pakistan $3 billion in foreign currency support along with a $3 billion facility for deferred payments for oil imports. The current stock of circular debt hovers around Rs2. 5 trillion ($14 billion). Pakistan also received $3 billion in economic assistance from the UAE in December 2018 while all-weather friend China lent $2.2 billion in March 2019. China is also investing close to $60 billion in Pakistan under the China Pakistan Economic Corridor (CPEC) of infrastructure and energy projects.

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Tobacco kills half of its users indicated by the World Health Organization. Tobacco use is the single largest preventable cause of death in the world killing 8 million people each year. More than 7 million deaths are due to direct results of tobacco use, while 1.2 million deaths are due to secondhand smoke. In Pakistan, tobacco is a cause of death for around 160,100 persons every year. The youth of Pakistan is being targeted by the tobacco industry so that “replacement smokers” could be recruited. Around 1200 Pakistani children between the age of 6 & 15 start smoking every day.

According to Global Adult Tobacco Survey, in 2014 almost 24 million (19.1%) adults currently use tobacco in any form. That accounts for 15.6 million (12.4%) adults who currently smoke tobacco, including 3.7 million adults using water pipes, hookah, or shisha, and another 9.6 million (7.7%) adults who use smokeless tobacco.

Smokers are two to four times more likely than nonsmokers to develop coronary heart disease. Yet low levels of tobacco exposure, with infrequent smoking or secondhand smoke, increase the risk of inadequate cardiac health. Male smokers are 23 times more likely, and female smokers are 13 times more probable than nonsmokers to develop lung cancer. Smoking causes 80-90 percent of deaths from lung cancer.

According to the Population and Housing Census, 2017, the total population of Pakistan was 207.77 million, and Population and Housing Census, 2017. Which shows a significantly high number of youths in the country.

In Pakistan, 1.4 million people get affected by oral cancer every year just due to cigarettes, urban hukkah / sheesha / electric vapes, gutka, pan, maywa, naswar, and so on. As per WHO, out of 100 cancer cases, at least 4 cases are of oral cancer in Pakistan. When we talk about Oral Cancer, the first thing that comes to mind is Smoking. In Pakistan, where regular food & other consumables have gone up over 60-80 percent on average in the last five years, the minimum price of a pack of cigarettes, unfortunately, remained the same.

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Tobacco Economics report published by the Institute of Health Research and Policy UIC stated that due to unchanged and low tobacco taxes, Pakistan ranks among the worst-performing countries in the Tobacconomics Cigarette Tax Scorecard that evaluates the strength of tax systems, with an overall tax system score of less than one on a five-point scale.

Cigarettes have become more affordable as tobacco taxes are low and have not increased since July 2019. The average excise tax rate in Pakistan is currently around 45% of the retail price against the widely accepted benchmark of 70%.In line with the recommendation of the World Bank, raising federal excise taxes on cigarettes by 30% would result in 200,000 fewer smokers and an increase of at least 25% in excise tax revenue.

Therefore, in compliance with the recommendation of the World Bank, raising 30% of the current FED in Pakistan means; raising tobacco excise to Rs 43 on low-price cigarettes and Rs 135 on high-price cigarettes would result in 200,000 fewer smokers, 1.2% reduction in smoking prevalence, 1.23 % reduction in smoking intensity among adults smokers, 71,900 lives saved, Pak Rs 27.4 Billion in additional total FED revenue—an increase of at least 25.1%.

“The Economic Cost of Tobacco-Induced Diseases in Pakistan,” recently released by PIDE, uncovers shocking and eye-opening statistics. The total costs attributable to all smoking-related diseases and deaths in Pakistan for 2019 are Rs 615.07 billion ($3.85 billion). This figure is five times higher than the tobacco tax ever received in Pakistan from Tobacco Industry. This report further reveals that a” major share (71 percent) of the smoking-induced costs come from cancer, cardiovascular and respiratory diseases. The total smoking-attributable costs are 1.6 percent of the GDP whereas the smoking-attributable costs of cancer, cardiovascular and respiratory diseases are 1.15 percent of the GDP”.

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It is no secret that taxes are real means of reducing tobacco consumption. Tobacco use creates a substantial economic burden on the population at large. Higher direct health costs linked with tobacco-related disease and higher indirect costs related to premature loss of life, disability due to tobacco-related illness, and productivity losses create significant negative externalities of tobacco use.

It is, therefore, an established reality that “increases in tobacco taxes decrease tobacco use.” Indeed, raising taxes on tobacco is one of the most effective ways to reduce tobacco use. As reinforced by FCTC that “Effective tobacco taxes not only reduce the externalities through reduced consumption and prevalence but also contribute to the reduction of governments’ expenditures for the health care costs associated with tobacco consumption.”

The government of Pakistan should increase Taxes on cigarettes immediately in line with FCTC recommendations. This will help the government to control tobacco consumption in the coming period. This will also help the government to regain lost Tax revenues in the past few years. This additional revenue will help the government to invest more in the health sector, Education structure, infrastructure & other consumables prices.

These recommendations are based on technical testimony, best practices, and the understanding of countries that have efficiently implemented tobacco control policies in ways that have improved their people’s health. Article 6 of the FCTC obligates member countries to adopt tax and price policies to reduce tobacco use. Prices affect virtually all commodities, including measures of cigarette use. This also influences per-capita consumption, smoking rates, and the number of cigarettes smoked daily.

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This Op-ed has been contributed by Dr. Ziauddin Islam, Country Lead Tobacco Control, Vital Strategies. The writer is Former Technical Head TCC of Ministry of NHSRC, Former Focal Person of Govt of Pakistan for WHOs FCTC, Health Economist, Global Public Health Physician, Research Scholar Institute of Tobacco Control, Johns Hopkins University, Baltimore USA. 

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