Deadly tobacco

KARACHI: The tobacco industry in Pakistan enjoys a thriving customer base, currently comprising at least 24 million active tobacco users in the country, Bol News has learnt.

According to a study titled ‘The Huge Economic Cost of Tobacco-Induced Diseases in Pakistan’, conducted by the Pakistan Institute of Development Economics (PIDE), the total costs attributable to all smoking-related diseases and deaths across the country, pre-pandemic era, were Rs615.07 billion. However, the tobacco industry’s total tax contribution, Rs120bn in 2019, was approximately just 20 per cent of smoking’s total cost, the PIDE report showed.

Experts stress the government can earn much-needed revenues by increasing tax on cigarettes rather than on essentials like baby milk and other food items.

Shariq Mahmood Khan who is the chief executive officer (CEO) of Chromatic Trust, an organisation working towards socio-behavioural and development changes in Islamabad, told Bol News that according to the Economics of Tobacco in Pakistan, raising taxes to 70pc would help half a million users in quitting the smoking habit. “This will also reduce premature deaths among adult smokers. The generated revenue can be allocated to healthcare and should prudently be used by both federal government and provincial governments to improve the people’s physical and mental well-being, particularly of the youth”, he said. This would also help increase productivity of the people as well, he added.

Speaking about the socio-behavioural changes, he elaborated, “Basically, as a nation we have to realise what products are detrimental for the future of our youth. There are two things related to this that come across my mind — physical abuse and tobacco abuse. So there is at least some visible work done to curb physical abuse through NGO work and legislation, but the tobacco abuse is a serious abuse issue that goes unchecked”, he regretted.

The cigarette sale system operates like an organised mafia that targets 1,200 minors every day, he revealed. “Now what can we do as a nation about this when the cigarette industry itself is inherently a legitimate one? We can demand more and more taxes on tobacco products so that our youth learns to distance itself from this habit”, he suggested.

The tobacco users are helpless at the moment and we also see them as victims, he also said. “If we systematically place barriers to cigarette consumption like we recently saw in New Zealand, then our future generations will become tobacco-free. A new threat for Pakistan is advertisements of new tobacco products that are targeting women who cannot smoke traditional cigarettes easily available to men. This has increased nicotine doses among women and the overall Pakistani population”, he apprised.

Khan revealed that there is also a trash space available in this nicotine pack so that disposal is not a problem for closeted smokers. “Since this product is hands-free, you can simply place the pouch in your mouth and no one knows about your nicotine consumption, making it easier for people to indulge in this activity and harder for their loved ones to stop them. No additional tools are required for this product and it is smell-free so consumers are able to get away with it altogether”.

This is a systematic way to target more and more women and minors, he claimed. “And this health crisis has only exacerbated since the incumbent government chose not to increase taxes on such products over the past three years. The same taxes have been imposed on children’s foods. So is children’s food more important or their tobacco consumption for this government?” he questioned.

Reportedly, the costs of tobacco consumption are high in terms of negative impacts on the economy and public health. Immediate action is needed to tax tobacco in order to generate additional funds for public health.  A World Bank (WB) Group report titled ‘Pakistan: Overview of Tobacco Use, Tobacco Control Legislation, and Taxation’ showed that in May 2019, the government had decided to impose health tax worth Rs10 on a pack of cigarettes as part of the budget for the 2019-2020 financial year (FY). However, later the health tax was, unfortunately, ignored.

In 2013, Pakistan adopted a new tobacco taxation policy with two specific tiers; then, the excise rates were regularly increased between 2014 and 2016. Cigarette prices increased and, despite the substantial reduction of tobacco affordability, cigarette production almost did not change, the WB report revealed.

The total revenue increased by 50pc in nominal terms, or by 30pc in real terms in three years and the situation dramatically changed in May 2016, the report read.

In the period of May 2016 till May 2017, the average monthly cigarette production was 50pc lower than in previous years. In FY 2016-2017, the nominal revenue decreased by 27pc and the real revenue by 30pc.

Khalil Ahmed, programme manager of the Society for the Protection of the Rights of the Child, (SPARC), has appealed to the government to increase taxes responsibly by maintaining public health as well as their productivity.

“Increasing taxes on anti-health products will not only discourage consumption of cancerous products but will also generate resources. The financial resources can then be allocated to the health sector for better health management. So, a tax on tobacco products will subsequently reduce the burden on the health infrastructure and ultimately save more lives”, he suggested.

The tobacco industry sources have explained the downfall of production and revenue by the alleged huge increase of cigarette smuggling and have persuaded the government to decrease the excise rate for low-priced cigarettes by 51pc from May 2017.

The WB report added that while the price of low-segment cigarettes decreased after the excise reduction, they were still much more expensive than the illicit cigarettes. “However, the legal production as well as the sales reportedly experienced huge growth, and in 2018, the cigarette production returned to the levels of 2011-2015”.

Moreover, the Social Policy and Development Centre’s (SDPC) research titled ‘Quantifying the Potential Tax Base of Cigarette Industry in Pakistan’, has analysed that the industry profile in Pakistan provides interesting insights. The aggregate size of firms selected for the analysis has increased more than four-fold during the past decade or so, as the net turnover went up from Rs17.6bn in 2004 to Rs70.4bn in 2018.

The SPDC study showed that among the three firms, the market share of one particular firm increased from 56pc to 75pc during this period. The analysis also showed that the increase in net turnover is more than the increase in the cost of sales.

Interestingly, during the past four years under analysis, tobacco firms reported a decline in their sales while profit margins remained substantially higher as compared to previous years. Thus, the decline in sales did not have much impact on profit margins in Pakistan.

Malik Imran Ahmed, country head Campaign for Tobacco-Free Kids (CTFK) Pakistan, told Bol News that tobacco is the “biggest silent killer” of Pakistan as 438 people die every day due to its consumption.

He added that Pakistani children between the ages of six to 15 start smoking every day. “The children of Pakistan are the biggest victims since the tobacco industry targets them as replacement smokers. Smoking tobacco should be taxed heavily, thereby making it difficult for [common people] to afford, and the government should also [clamp down] on the grey market through a track and trace mechanism”, he suggested.

Moreover, the CTFK head stressed the need to quantify the potential tax base of cigarette consumption in the country. “Companies pay billions of rupees to celebrities in order to maintain tax-free cigarette prices. The propaganda is that there is ‘illicit trade’ of cigarettes and this incentivises more people to smoke more”, he claimed.

He revealed that the revenue collected from consumers, that goes to the government, is around Rs125bn annually. There are tax-free companies in the tobacco industry which claim they give their share to the government but they actually don’t, he alleged. “They simply collect the money from the consumers via pricing strategies. The cigarette tax problem is huge here. The World Health Organisation recommended a retail price that should include 75pc tax and the CTFK recommended a 100pc-200pc tax so that the price of the average cigarette box is Rs500. Sadly, some industrialists are creating hurdles in the cigarette taxation”, he said.

Representatives of a multinational cigarette and tobacco manufacturing company were unavailable to comment over cigarette excise tax and anti-tobacco legislation in Pakistan.

Studies have shown time and again that the industry enjoys a thriving customer base with ‘replacement smokers’ jeopardising efforts to confront the harmful activity. Such insights show that the true social and economic costs of cigarette consumption in the country are very high, disproportionately affecting lower-income smokers.

The health costs of tobacco consumption are more than five times the tax receipts in the country and although the industry is a major taxpayer in absolute terms, its contribution is just a small fraction of the total costs that the public and subsequently the government have to bear. The major share of these costs comes from illnesses like cardiovascular and respiratory diseases as well as cancer. Many citizens experience these health problems for a long time before they are diagnosed and only the privileged are willing and able to afford treatment.

As there is evidence of higher tobacco taxation discouraging smoking overall, there needs to be more transparency on the tobacco policy of the centre and provinces to manage the deadly indulgence so that both active and passive smokers can be protected.