Budget 2020-21: Govt to enhance tax ratio on tobacco products
The government is likely to increase the tax on tobacco products in a bid to generate revenue of around Rs.140 billion in next fiscal year 2020-21 against projected collection of Rs116 billion in current fiscal year.
Imposing a tax on cigarette pack is one of the options, which can help increase government revenues from the tobacco sector, officials said.
In March this year, the National Health Services Division had also presented a draft Bill, proposing imposition of a levy on cigarettes. However, the Federal Board of Revenue opposed the levy on the cigarette manufacturing industry but the Finance Division agreed to impose the tax on cigarette, they said.
The government is also considering to increase the ratio of advance tax on tobacco crop from Rs10 per kg to Rs500 per kg in the next budget.
According to industry representatives, the tobacco industry has proposed the government for jacking up Rs400 on tier-1 of Rs5,600 per thousand cigarettes and slash down same amount (Rs400) on tier-2 of Rs1250 per thousand cigarettes in the upcoming budget for 2020-21.
With approval of this proposal for Federal Excise Duty (FED) for the budget makers from one of the major revenue spinners, they estimated that the FBR revenues could go up to Rs140 billion in next fiscal year 2020-21 against projected collection of Rs116 billion in outgoing financial year 2019-20, registering 20 percent increase in tax collection in shape of FED in coming financial year.
The FBR’s revenue has declined with hike in taxes as industry argued that the legitimate volume of production reduced from 65 billion sticks in 2018-19 to 42.6 billion sticks in 2019-20. So the tax revenues also slashed down from Rs124 billion in fiscal year 2018-19 to Rs116 billion in current fiscal year. Against the desired target of Rs147 billion, the FBR has been facing a shortfall of Rs31 billion in the outgoing fiscal year from this sector alone.
Industry stakeholders and farmers bodies’ representatives also met with Pakistan Tobacco Board (PTB) leadership and appealed to raise voice and announce support in this regard.
Farmers’ representatives expressed concern that advance tax on tobacco crops will diminish the number of tobacco dealers, killing the local tobacco industry and millions associated with this cash crop.
Industry experts suggested that in a bid to increase revenues from the tobacco sector, the government should take stern action against the nationwide sale of smuggled and illicit cigarettes and increase taxes on tobacco packs.
Anjuman Tahafuze Haqooqe Kashtkaran president Haji Naimatullah said if the government increase taxes, it would add further to the miseries of a daily wagers of tobacco sector. He said that tobacco farmers and the industry labors play a vital role for the Pakistani tobacco sector and indirectly towards the national economy.