Positive impact shown by high FED on cigarettes
Published on: April 26, 2024.
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High FED rates on cigarettes: a win-win for revenue and public health
Islamabad:
The government’s decision to increase the Federal Excise Duty (FED) on cigarettes has proven to be beneficial both in terms of generating revenue and reducing cigarette consumption. According to the Federal Board of Revenue (FBR) Yearbook 2022-23, the share of cigarettes in the overall FED collection has risen to 40 percent.
This significant increase can be attributed to the higher FED rates imposed on cigarettes. After a three-year stagnation period, the fiscal year 2022-23 witnessed three significant upward revisions, resulting in this positive development.
The FBR Yearbook stated that one of the major contributors to FED revenues was the cigarette sector, which experienced inflation as well as an increase in excise duty rates.
As cigarette consumption decreases, there is a corresponding reduction in health-related issues, which could lead to lower healthcare expenditures and contribute to a healthier and more sustainable society. This decline in tobacco usage aligns with broader public health objectives.
A study by the Pakistan Institute of Development Economics (PIDE) highlights the significant economic impact of tobacco use. In 2019, the costs associated with diseases and deaths caused by smoking amounted to a staggering Rs 615.07 billion ($3.85 billion), equivalent to 1.6 percent of the GDP.
Malik Imran Ahmed, Country Director of Campaign for Tobacco Free Kids (CTFK), commented on this development, stating that the tobacco industry had expressed dissatisfaction with the increase in FED, claiming that it would lead to shutdowns. However, the data from FBR challenges this assertion, clearly showing a substantial 40 percent share of the FED.
Independent experts strongly urge the FBR to implement the World Bank’s recommendation of increasing FED on cigarettes, as outlined in the recent Pakistan Development Update (PDU) report. The report suggests that applying the current rate on premium cigarettes (PKR 16.50 per cigarette) to standard cigarettes could result in a significant revenue gain of 0.4 percent of GDP.
The guidelines of the WHO Framework Convention on Tobacco Control (FCTC) also emphasize the importance of taxation as a primary tool in reducing tobacco consumption.
Source: [Islamabad Post](https://islamabadpost.com.pk)
