Big Tobacco’s at it again

Here I am - slumped in my chair, in the kind of way that will only hasten the curvature of my spine into an indignant question mark. I am transfixed by a video of a duck playing with a Labrador. Which is to say that I am not proud of myself, but I am thawing, and entering a state of ease. That is, until the screen goes black.

Mystery is afoot. I suspect a hijacking. Or a coup.

An ad begins to play. The colours are red and white and black – universal cues that attention is no longer optional. The font – bold and boxy. The score radiates the urgency of a Shahid Masood video insisting that humankind is heaving its last laborious breaths.

This is not the kind of information that lends itself to passive consumption. I correct my posture.

Now, the man who sang Channo is in the frame. His finely chiselled jaw cuts through the rising anticipation. He tells me that someone is stealing my money. Our money – mine, yours, Channo’s. Seventy-seven billion rupees every year, he says. It is the illicit tobacco industry, he tells me. I am insulted. How dare they?

I have many questions. But like a hologram from the future, that only has enough time to equip me with the knowledge that will set me on my lone quest, he has disappeared.

The online channel pushing the ad is something called ‘Behtr Pakistan’. I spell ‘behtar’ with an ‘a’; so I imagine this is one of those start-ups with an aversion for vowels. I play some of its other videos. Now, the man who sang Billo is in the frame. Next up are both of our national Was(i/ee)ms. Sitting senators urge me to walk with them – supposedly, there is a ‘Walkathon’ today, on the 6th of June. What start-up has these connections?

I discover a website. The ‘About Us’ tells me nothing about ‘us’. So, I turn to Google. A few searches later, I discover another website – StopIllegalTrade.pk. And, as I scroll to the bottom, there it is: Financial Support provided by … drumroll… Philip Morris Pakistan Limited. Between this website and the other, there isn’t much mystery left as to who stands to gain from hiring half the entertainment industry like this. It’s Big Tobacco, and it’s at it again.

The budget is upon us, and every year, with the prospect of new taxes looming over Big Tobacco’s head, the rest of us start to hear a whole lot more about its arch-nemesis: the illicit tobacco sector. Broadly, this includes smuggled cigarettes, fake cigarettes, and non-duty-paid cigarettes. The ads are everywhere: on the radio, on the television, on roadside banners.

Despite what any popstar or parliamentarian may have been made to believe, the fundamental tension is simple. The government wants to increase revenue from taxes, and decrease the consumption of the single largest preventable cause of death and illness in the world. The tobacco industry, in turn, wants to keep as much money as it can. Which is when it begins to deflect attention towards illicit tobacco.

To be clear, the illicit sector is – indeed – a truly terrible thing. It injects the same cancer and lung disease into society; but it pays nothing in taxes and doesn’t bother with things like health warnings. It’s also notoriously good at helping people launder money. So, it really is a lose-lose situation. Illicit tobacco definitely needs to go.

But the tobacco lobby – the undisputed King of Spin (now with the help of the King of Swing) – is able to use the existence of illicit tobacco to its advantage quite masterfully. When the government considers increasing taxes on tobacco, Big Tobacco goes, “We are 60 percent of the market, but we pay over 95 percent of the total taxes. If you really want to increase revenue, you should be targeting the remaining 40 percent that basically pays nothing.”

Our governments have, historically, been quite convinced by this argument. This is why our score on the University of Illinois at Chicago’s International Cigarette Tax Scorecard is still 0.88 out of 5. This is against an average of 1.82 in South-East Asia and a global average of 2.07. But, really, there’s no logic to Big Tobacco’s ‘argument’, and the numbers it cites aren’t to be trusted.

Collecting taxes isn’t like cutting a cake. If the legal tobacco industry pays more, this won’t mean the illicit sector will play less. This thinking conflates policy with enforcement. Deciding that a particular amount of tax should be charged for a packet of cigarettes is a matter of policy; ensuring that everyone complies is a matter of enforcement. Both can – and should – happen simultaneously.

But the tobacco lobby also offers a somewhat more sophisticated argument that relies on the ‘substitution effect’: “If we pay even more in taxes, our products will become more expensive and people will switch to cheaper alternatives.” In theory, this argument makes sense; in practice, as a 2019 World Bank report finds, this is wildly overplayed.

Then there’s the issue of the numbers. There is the idea that the legal sector already pays ‘so much’, and the idea that ’40 percent’ of the industry pays nothing. First, the ‘so much’ part. Yes, Pakistan Tobacco and Philip Morris are basically the only ones in the industry who pay taxes. But the amount they’re asked to pay is still well below the WHO’s recommendations, and one of the lowest in the region. (Which, in turn, implies that increasing taxes isn’t about to lead to some massive layoffs: the same companies are doing just fine in other countries within the region.)

The whole argument also focuses on just one end of the equation. A PIDE report from April of this year estimates that, in 2019, the tobacco industry paid Rs120 billion in taxes, and contributed costs of over Rs615 billion in death and disease. Even going by the tobacco industry’s 60-40 split between the legal and illegal market share, Big Tobacco pays Rs120 billion and injects three times as much by way of costs. Regardless of whose pockets the money is going in and out of, the people – for whom taxes are raised – lose out.

But there are good reasons to be suspicious of the claim that the illicit market is 40 percent of the tobacco sector, to begin with. Consider where the number comes from – think tanks like ‘Oxford Economics’ and ‘Euromonitor International’ – both of which receive funding from Big Tobacco. Meanwhile, truly independent surveys peg the actual market share of the illicit industry at between 9 and 16 percent. This discrepancy should come as no surprise to anyone familiar with the old tactics of the tobacco industry, which has even gone so far as to finance research attempting to suggest that smoking doesn’t actually cause cancer.

The truth is simple: we don’t tax tobacco nearly enough. If we want to decrease consumption, we should increase taxes. As a recent SDPI report details, implementing strict tax measures was able to turn Sri Lanka from a country where 40 percent of all males smoked to one where 32 percent did within less than a decade. To use Behtr Pakistan’s own argument, increasing taxes will also help fight what it calls a ‘national tax emergency’.

But all of this is about much more than just taxes; it is also about the other certainty – death. Smoking kills more people than AIDS, legal drugs, illegal drugs, road accidents, murder, and suicide combined. The tobacco lobby doesn’t limit its use of the illicit sector as a smokescreen when it comes to taxes, either. From attempts to promote standardised packaging to reduce appeal, to introducing legislation to counter emerging forms of tobacco products such as Velo – any time the government suggests measures, Big Tobacco successfully hijacks it by crying “But, Illicit trade!”

In fact, in many ways, having the illicit sector around does Big Tobacco a lot of good. Which is why leaked documents from the 90s revealed how much of the illicit sector can be traced back to companies like Philip Morris and British American Tobacco, themselves.

Yes – fight illicit tobacco. In Pakistan that, too, is a well-entrenched lobby that even has members sitting within our legislature. It has everything that’s wrong with Big Tobacco, and more. But let that not distract the rest of us from regulation of the rest of the industry.

Perhaps, with a prime minister who runs one of the best cancer hospitals in the region, there is hope yet. Steps like the proposed ‘health tax’ on cigarettes (approved but not yet implemented) are steps in the right direction. But there is much road to travel yet.

Feel free to walk the journey in a Walkathon, if you prefer that, but let’s not forget where it is we’re really supposed to be going.

The writer is a lawyer.

Email: salaar.khan@columbia. edu

Twitter: @brainmasalaar