Islamabad – The Society for the Protection of the Rights of the Child (SPARC) held a significant event on Wednesday to unveil a policy brief titled ‘Facts vs Industry Narrative: Cigarette Production and Taxation in Pakistan’, published by the Social Policy and Development Centre (SPDC). The policy brief sheds light on the practices of cigarette manufacturers in Pakistan, particularly in relation to taxation, and raises concerns about the industry’s impact on public health and the economy.
Cigarette Producers and Financial Performance:
According to the Principal Economist of SPDC, Muhammad Sabir, three major cigarette producers dominate Pakistan’s market, accounting for over 90% of the country’s total cigarette production. These companies are Pakistan Tobacco Company (PTC), Phillip Morris Pakistan (PMPK), and Khyber Tobacco Company.
Analyzing the financial statements of these companies, the policy brief reveals that their net turnover and gross profit collectively increased from 72 billion Rupees between July 2021 and March 2022 to 94 billion Rupees between July 2022 and March 2023. Moreover, the gross profit also rose from 33 billion Rupees to 46 billion Rupees during the same period.
Questionable Taxation Practices:
The policy brief highlights that during the first quarter of 2023, when tax rates were significantly increased, and the reported production declined by half, the companies’ profits remained unaffected. This suggests that the tobacco industry may be under-reporting its production to evade taxes. Muhammad Sabir emphasized that if the industry is not engaged in such practices, it should not complain about increased taxes since its profits have continued to rise.
Tax Revenue and Industry Claims:
Malik Imran, the Country Head of Campaign for Tobacco-Free Kids (CTFK), focused on the tax revenue generated by these companies. He stated that the total tax revenue, including Federal Excise Duty (FED) and Goods and Services Tax (GST), paid by the companies increased from PKR 114.5 billion in July 2021 to March 2022 to PKR 127.5 billion in the first nine months of the current fiscal year, representing a growth of 11.3 percent.
Imran further emphasized that cigarette manufacturers prioritize their profits above all else, without considering the adverse impact on the economy or public health. He added that the analysis presented in the policy brief effectively counters the cigarette industry’s claims regarding the negative consequences of higher cigarette taxes.
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A Call for Action:
The revelations brought forth by SPARC and SPDC’s policy brief underscore the need for stricter monitoring and regulation of the cigarette industry in Pakistan. To effectively combat under-reporting and tax evasion, it is crucial for relevant authorities to ensure greater transparency and accountability within the industry. Additionally, the government must prioritize public health concerns by implementing stronger measures to discourage smoking and reduce tobacco consumption.
The policy brief serves as a wake-up call for policymakers, urging them to reconsider taxation policies and take decisive action to protect both the economy and the well-being of the Pakistani population. By holding the cigarette industry accountable and promoting public health initiatives, Pakistan can make significant strides towards creating a tobacco-free society.
In conclusion, the SPARC policy brief casts a spotlight on the cigarette industry’s questionable taxation practices in Pakistan, revealing the need for urgent measures to address these concerns. The findings challenge the industry’s assertions and emphasize the importance of prioritizing public health over profits in combating tobacco consumption and its detrimental impact on society.
