ISLAMABAD: The Senate of Pakistan has recommended a significant policy shift, advocating for tobacco to be treated as a crop and exempted from duties and taxes. This recommendation was made in the context of the Finance Bill 2020, reflecting the upper house’s stance on the agricultural status of tobacco.
In its detailed recommendations to the National Assembly, the Senate proposed that tobacco should be categorized alongside staple crops such as wheat, maize, and sugarcane. This reclassification aims to relieve tobacco farmers from the burden of taxes and duties, ensuring that only processed and manufactured tobacco products bear the fiscal load.
The Senate emphasized that imposing taxes on tobacco in its raw form undermines the agricultural sector and places undue financial strain on farmers. Instead, they suggested that the Federal Excise Duty (FED) on cigarettes should be increased in accordance with the guidelines provided by the World Health Organization (WHO). This adjustment is intended to align Pakistan’s taxation on tobacco products with regional standards, promoting public health objectives while maintaining economic balance.
Moreover, the Senate highlighted the necessity of rationalizing the taxation rates on cigarettes produced by local enterprises compared to those processed or manufactured by multinational companies. They advocated for lower tax rates and duties on locally produced tobacco products to support domestic businesses and level the playing field against international brands.
A significant part of the Senate’s recommendations also focused on combating the smuggling of international brand cigarettes. The upper house called for stringent anti-smuggling measures to be implemented to prevent the illegal movement of these products into and out of Pakistan. Such measures are crucial to safeguarding the local tobacco industry and ensuring that tax regulations are effectively enforced.
The Senate’s recommendations underscore a dual approach: promoting the agricultural aspect of tobacco cultivation while tightening regulations and taxes on processed tobacco products. This approach aims to support local farmers, enhance public health, and curb illegal trade practices.
These proposed changes are now in the hands of the National Assembly, which will deliberate on their implementation as part of the Finance Bill 2020. If adopted, these measures could lead to significant shifts in the tobacco industry’s regulatory landscape, impacting farmers, manufacturers, and consumers alike.
