The Federal Tax Ombudsman (FTO) has asked the Ministry of Finance budget makers to raise the Federal Excise Duty (FED) on cigarettes and beverages in the upcoming budget (2022-23).
The FTO office has submitted budget proposals to the Federal Board of Revenue (FBR) for fiscal year 2022-23.
According to the FTO, cigarettes in Pakistan are taxed in two price tiers: low-priced and high-priced.
On cigarettes sold in the country, a specific excise tax (the Federal Excise Duty-FED) is levied, accounting for approximately 42.6 percent and 59.8 percent of the printed retail price of low-price and high-price brands, respectively, resulting in a significant excise tax burden difference between the two tiers.
Because low-taxed cigarettes account for roughly 88 percent of the market, the average excise tax share is 44.7 percent of the retail price, which is significantly lower than the widely accepted benchmark of 70 percent of the retail price.
A uniform FED for all cigarette brands is proposed, simplifying the tax system and harmonizing excise taxation across all tobacco products.
Furthermore, incorporating an automatic inflation adjustment mechanism in each tax year in the tax policy for cigarette taxation would cover price inflation every year, according to the FTO’s proposals.
According to the FTO’s budget proposals, representatives of the Pakistan National Heart Association (PANAH) met with the FTO and submitted that there is a direct and strong link between the consumption of sugar-sweetened beverages (SSBs) and obesity and non-communicable diseases (NCDs) such as diabetes, hypertension, and cardiovascular illnesses.
SSBs are any liquids that have been sweetened with various types of added sugars. Global health organizations such as the American Heart Association, WHO, and the World Bank have identified a number of policy interventions, including but not limited to increased taxation.
It also proposed that at least a 20% FED be imposed on SSBs such as soft drinks, energy drinks, sports drinks, sweetened coffee drinks, sweetened iced tea, flavored milk, and so on.
To accomplish this, amendments to the entries at serial numbers 5 and 6 in the First Schedule of the Federal Excise Act 2005 are proposed.
To read our blog on “Tobacco Industry’s Ad On Illicit Cigarette Trade a ‘Smokescreen’,” click here.
