Pakistani government places expensive cigarette brands in lower tax bracket

Jul 05, 2022 11:11 PM STI

Islamabad [Pakistan]July 5 (ANI): The Pakistani government has quietly raised the threshold for higher tariffs on expensive cigarette brands to keep smoking affordable in the country.
The government used to charge an excise duty of Rs 5,200 for 1,000 cigarettes, however, to bring a few expensive brands into the lower tax bracket, the government increased the taxable threshold for top brand cigarettes from the printed price of Rs 5,960 for 1,000 sticks at 6,660 rupees. The change was made on the eve of the approval of the budget by the National Assembly, reports L’Express Tribune.
Many cigarette brands that now fall under the low tax tier would have been moved to the higher tier had the government not changed the taxable price limit of the higher brands, as this would have discouraged smoking in the country.
Before the budget, the FED on locally produced cigarettes with a retail price of less than Rs 5,960 per 1,000 cigarettes was Rs 1,650 which in the budget was increased to Rs 1,850 resulting in a tax additional 20 paise per cigarette. The threshold for determining the low tax rate was previously 5,960 rupees but has now risen to 6,660 rupees, The Express Tribune reported.
“The government misled people who were advocating increasing the tax burden to discourage smoking,” said Dr Ziauddin, National Tobacco Control Manager, Vital Strategies, adding that after the increase in the taxable slab limit , the prevalence of smoking would increase, which also significantly increases the cost of illness.
Pakistan ranks very low in the Tobacconomics Cigarette Tax Scorecard which assesses the strength of tax systems, with an overall tax score of less than one on a five-point scale due to unchanged and low tobacco taxes. .
According to SPDC estimates, more than 260,000 people will start smoking in Pakistan if tobacco taxes are not increased in 2022-23, while around 150,000 die each year from tobacco-related diseases, says the SPDC report.

While chairing a cabinet meeting on the new budget proposals on June 10, Prime Minister Shehbaz Sharif showed his displeasure with the Fed’s proposed rate hike and called for the tax burden to be further increased by 25 billion rupees in the new financial year.
Meanwhile, Finance Minister Miftah Ismail also assured the Pakistan People’s Party – the main coalition partner – that he would ensure that the tobacco sector pays 225 billion rupees in taxes against 150 billion rupees during the fiscal year just ended. This promise may also remain unfulfilled.
However, criticizing the decision on higher duty on expensive cigarette brands, Federal Water Resources Minister Khursheed Shah said Pakistan was among the countries with the lowest cigarette tax, which not only reduced income, but also put people’s health at stake. Express Tribune reported.
According to SPDC estimates based on IMF projections, about 4 of per capita income was needed to buy 2,000 cigarettes in 2020-21, which would decrease to 3.6% in 2021-22 and decrease further to 3.2% in 2022-23 if cigarette prices do not increase.
Low-tax cigarettes make up the majority of the market, while the average share of excise duty is almost 45% of the retail price, which is well below the widely accepted benchmark of 70% of the retail price.
According to Pakistan Tobacco Company, one of the two major manufacturers in Pakistan, the threshold between Tier I and Tier II cigarettes is changing in sync with the increase in the Tier I FED rate which has increased the minimum price of cigarettes sold in the country, the company said.
The government of Shehbaz Sharif on Friday raised tax rates for the working class to meet the requirements of the International Monetary Fund (IMF).
He had withdrawn the tax relief for the salaried class announced on June 10 and the collection target of the Federal Board of Revenue (FBR) was raised to Rs 7.470 billion.
On the personal income tax (PIT), the government raised an amount of tax of Rs 80 billion because first, the government abolished the tax relief of Rs 47 billion and then raised an amount of tax of Rs 35 billion, so that the FBR would collect Rs 235 billion from the salaried class in the next budget against a collection of Rs 200 billion in the outgoing budget year. (ANI)

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