PM urged to halt adoption of tobacco industry statistics by state institutions

Islamabad

TheNetwork for Consumer Protection has appealed to Prime Minister Nawaz Shairf to take strict notice of state institutions adopting and quoting the tobacco industry’s statistics to weaken the government’s anti-tobacco regulation.

Nadeem Iqbal, Chief Executive of TheNetwork, pointed out Friday that instead of generating their own statistics or adopting those of government agencies, some state institutions have been adopting the tobacco industry-generated deceptive statistics that health regulations result in loss of revenue to the government. These deceptive arguments are also the reflected in debates in the Parliament.

“The tobacco industry’s claim that stringent health regulations results in increase in tobacco smuggling and counterfeit cigarettes has no evidence, but the fact that WHO-recommended higher taxes on tobacco raise FBR revenue and keep cigarettes away from children is a widely proven fact,” says Nadeem.

A report released recently by a state institution and published in different media outlets claimed that illicit cigarettes account for 40 per cent of the total demand in Pakistan. The report quotes tobacco industry’s statistics, which exaggerates the nature and impact of illicit trade when arguing against proven measures to reduce tobacco use because communicating the truth about tobacco control and illicit trade does not serve its interests.

In reality, says Malik Imran Ahmed, a representative of Campaign for Tobacco-Free Kids USA, strong tobacco control policies like tobacco tax-increases reduce tobacco use even in the presence of illicit trade.

According to Euromonitor International, the proportion of total cigarette sales that are illicit has actually declined over the past five years. In 2011, 27.3% of total cigarette sales were illicit, while in 2015 this had decreased to 20.6%, about half as much as claimed in the report. The volume of illicit cigarettes sold has also decreased annually since 2011, from 23.6 billion sticks that year to 15.5 billion in 2015, he added.

On the other hand, legal cigarette sales have indeed decreased annually. Euromonitor International reports 59.8 billion sticks sold in 2015, down from 62.9 billion in 2011. This reduction in cigarette consumption is a success for tobacco control and public health policies.

The said report also claimed that federal excise duty paid on cigarette sales has declined in the first quarter of Pakistan’s fiscal year (June 1-Aug 31, 2016). This can be attributable to stockpiling: a tobacco industry strategy to undermine tax increases by over-supplying their products to the market before the increase goes into effect. In reality, higher tobacco taxes actually produce higher tax revenues. The demand for tobacco products is inelastic which means that the proportionate reduction in demand for tobacco is smaller than the proportionate size of tax increase. Thus, even though demand is reduced when taxes and prices increase, the higher tax rate will result in overall increases in tax revenues.

Tobacco taxes are not the primary reason for cigarette smuggling. Levels of smuggling are generally higher with lax law enforcement and criminal prosecution, weak penalties for smuggling crimes, and corruption. Other factors include the ease and cost of operating in a country, organised crime networks, government policies regarding illicit trade of tobacco products, and the general acceptance of illicit trade.

Every nation and sub-national entity with an efficient tax system that has significantly increased its cigarette tax has enjoyed substantial increases in revenue, even while reducing tobacco use.

At the international front, the Protocol to Eliminate Illicit Trade in Tobacco Products (ITP) was adopted by the Parties to the WHO Framework Convention on Tobacco Control (FCTC) in November 2012 as the global solution to illicit trade. The ITP calls for supply chain controls related to licensing, tracking and tracing, record-keeping; regulation of tobacco product sales by internet, phone and tax- and duty-free zones; and criminal liability and international cooperation. The ITP will complement and expand Parties’ obligations under Article 15 of the FCTC. To date, 25 countries have ratified the ITP, and another 15 must ratify the protocol in order for it to enter into force. Pakistan should ratify and follow the ITP in order to combat issues of illicit trade.

Raising the price of cigarettes is the principal measure for discouraging consumption and avoiding the initiation of tobacco use among children and youth. Reduced tobacco consumption will result in a healthier and more productive workforce, which will help boost the economy. Increased government revenues from higher taxes and reduced health care costs for tobacco-related diseases can finance government programmes that benefit the economy.