Uniform excise duty on all cigarette brands suggested

The World Health Organisation (WHO) has suggested to the Federal Board of Revenue (FBR) to introduce a uniform excise duty on all cigarette brands instead of current tiered one. National Tobacco Control Officer Shahzad Alam Khan while addressing a media orientation session on a strategy package to control tobacco use said that a price rise of 10 per cent decreases consumption by up to 8 per cent in low and middle-income countries.

 He said that Pakistan has ratified WHO Frame Work Convention on Tobacco Control, which is the first international public treaty. WHO has been advocating for a package of six strategies to control the use of tobacco in Pakistan. These included: monitoring, smoke-free policies, cessation, warning, banning ads and raising taxation. Shahzad Alam Khan said that the powerful presence of the industry can be gauged from the fact that 75.8 billion cigarette sticks were produced in Pakistan during 2008-09 as compared to 49.6 sticks during 2002-03. Over 80 per cent cigarettes are produced by two major companies annually. According to him, cigarette market in Pakistan is dominated by lower mid-priced cigarettes, which are almost 90 per cent of the market and positioned in lower middle tier of the excise duty structure.

Premium market is only 10 per cent whereas there are no brands in lower tier of the excise duty structure. At present, consumer price of a pack of 20 of most sold brand in the country is Rs.28.80 ($0.33) which is almost lowest in the world: Similarly, excise incidence on consumer price on most sold brand is 46 per cent whereas the same on premium brands is 56 per cent and cheapest brands is 50 per cent. This excise incidence is also very low, however, situation of total tax incidence is not that alarming as it is 60 per cent on most sold brands whereas 70 per cent on premium and 64 per cent on low brands. However, due to complex excise duty structure, tax administration in Pakistan has not historically been in driving seat.

“We suggest that Pakistan may introduce a uniform excise duty on all brands instead of current tiered structure. The rate of excise duty on low and lower middle tier brands should be increased which will result in increasing excise incidence on most sold brands and increase incidence on low brands. Since these two categories are almost 85 per cent of the market, they should be focused more,” he said. The WHO representative stressed that in the budget 2012-13, government should introduce simple taxation system. He said that every cigarette pack should have tax stamp on it, as the present tax slab system is complex and have leakages in it. He urged the government to tighten the supervision and monitoring of the cigarette companies in order to stop under-invoicing and tax avoidance.

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