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Business Recorder
2 days ago
- Business
- Business Recorder
WHO warns unchanged FED on cigarettes may boost consumption
ISLAMABAD: World Health Organization (WHO) has expressed serious concern that the Federal Cabinet decision to keep Federal Excise Duty (FED) rates on cigarettes unchanged in budget (2025-26) would increase cigarette consumption in Pakistan. According to a report of the WHO on post-budget analysis and review issued on Wednesday, since February 2023, the Federal Excise Duty (FED) rates on cigarettes have remained unchanged. The Cabinet has maintained these rates in the proposed budget for FY 2025–26. With inflation rising by 26% over this period, the real value of FED rates and cigarette prices has declined, and this trend is expected to continue in the absence of any adjustment. For FY 2024–25, WHO has estimated cigarette production at approximately 37 billion sticks, an increase compared to the previous fiscal year—and projected FED revenue at Rs. 208 billion. Given the decision to keep FED rates unchanged for FY 2025–26, nominal cigarette prices are likely to remain flat, implying a further decline in real prices. This will likely result in increased cigarette consumption. Based on a simple simulation model, cigarette production (and consumption) is projected to reach around 38 billion sticks, generating Rs 217.6 billion in FED revenue in FY 2025–26. Alternatively, a policy intervention involving a Rs 39 per pack increase in FED could reduce cigarette consumption by an estimated 10.7%, bringing production down to around 34 billion sticks. This policy would also boost FED revenues by 20.9% compared to the current plan, resulting in higher fiscal and public health gains. Notably, the government has set a revised FED revenue target of only Rs. 147 billion from cigarettes in FY 2024–25—a surprisingly conservative figure, considering actual collections reached Rs 157 billion during the first nine months of the fiscal year. We estimate that total FED revenue for FY 2024–25 will reach approximately Rs. 208.2 billion, nearly Rs. 60 billion more than collected in the first three quarters. Estimated cigarette FED collection in FY 2024/25. Based on PBS's data, the average annual growth rate of cigarettes production from July 2024 to April 2025 is 12.4% higher when compared to July 2023/April 24. By assuming the same annual growth rate for the next two months, the estimated production of cigarettes for 2024-25 will be around 37 billion sticks. By applying the above market shares and FED and GST rates, it is important to note that the estimated FED revenue collection for 2024-25 is 208.2 billion Rs. This is much higher than 147.8 billion Rs of the government's revised target for 2024-25. The total indirect tax collection from cigarettes (FED+GST) in 2024-25 will be around Rs 275.7 billion. To protect both public health and government revenue, Pakistan's tobacco tax policy should be reassessed and strengthened. This includes regular adjustments to the Federal Excise Duty (FED) rates and stricter oversight of industry practices, such as production front loading ahead of the budget and manipulation of brand mixes. However, the current budget proposal for cigarette FED rates does not incorporate these tax policy corrections needed to meet revenue and health objectives. With this decision, the government and FBR hope to control cigarette illicit manufacturing and smuggling. To address those challenges, however, proper tax administration measures should be implemented, such as effective controls of the distribution movements of tobacco leaves, used cigarette machinery and other key cigarette inputs inside the national territory, WHO added. Copyright Business Recorder, 2025
Express Tribune
5 days ago
- Business
- Express Tribune
Govt eases curbs on big-ticket purchases
Finance Minister Muhammad Aurangzeb on Monday formally unveiled a Rs36 billion mini budget in the National Assembly and announced to exclude almost the entire population from disclosing source of income before buying a big home, a car or running a bank account. The limits set for disclosing the source of income before making big purchases would now target only the users of above 1,600 cc cars, and people owning more than one-kanal residential houses in major cities and almost two-kanal houses in other cities. Effectively, this has rendered the enforcement initiative of the Federal Board of Revenue (FBR) chairman ineffective, which has also lowered the success rate to catch the tax evaders to just 3.7%. The FBR does not have the capacity to go after the people once they have made these purchases, thus, the government had planned to pre-empt the purchases. Aurangzeb made these announcements while winding up the budget debate in the National Assembly. With the winding up speech, the formal process for approval of the next fiscal year's budget and tax measures has begun that will end with the approval of the Finance Act likely on Thursday. The finance minister presented three more budget proposals before the National Assembly, which also target one-day old chicks, to generate a total Rs36 billion in additional taxes in the fiscal year 2025-26. He proposed increase in the tax rate on the income derived from the debt portion of mutual funds issued to companies from 25% to 29%. The minister said that the companies' other incomes were already taxed at the 29% rate. Aurangzeb said that the income tax rate on profits made by corporations and companies on investments in government debt is also increased from 15% to 20%. The government has also proposed tax on the poultry sector, where billions of rupees investments are made, said Aurangzeb. "It is proposed that a Federal Excise Duty (FED) of Rs10 per day-old chick should be imposed on hatchery chicks, so that this sector can also contribute to the national exchequer," he said. The government has estimated that about 1.5 billion chicks are produced every year and it will collect Rs15 billion by taxing a product that is a common diet of the poor and the rich. The minister said that these three additional measures will not impact the industry and the burden has been passed on to the wealthy people and institutions. The government proposed the Rs36 billion measures in lieu of reduction in proposed sales tax rate on import of solar panels from 18% to 10% and funding an increase in salaries of the government employees to 10%. Aurangzeb claimed that the government has presented a balanced budget for the fiscal year 2025-26. On the one hand, we have kept government expenditure under control, while on the other, much emphasis has been laid towards increasing the tax base and its compliance, said the finance minister. Exclusion Earlier, the government proposed that all those citizens should be barred from buying major assets, if their declared wealth does not support such purchases. But the finance minister announced the measure to drastically tame these powers. "On the instructions of the prime minister, this new law will not apply to the purchase of residential plots or houses worth up to Rs50 million, commercial plots or properties worth up to Rs100 million and vehicles worth up to Rs7 million," he said. These limits are "too generous" and compromise the objective of linking the purchases with white money, a senior FBR official told The Express Tribune. Early this year, the FBR chairman had informed the National Assembly Standing Committee on Finance that due to almost no capacity of the FBR to audit the tax statements, the rate of success in inquiring the people about the source after making these purchases was only 3.7%. The government has also agreed to relax the criteria for banning the economic transactions such as buying a home, plot, car, investing in securities and maintaining a bank account by those, whose declared assets do not support these purchases. It had proposed to ban all such transactions if the declared assets do not support these purchases. The ineligibility condition will be applicable only if the cash in the bank account is more than Rs100 million per annum in all bank accounts of one individual. The ineligibility condition on stock market investment would be applicable, if the cumulative investment in a year is more than Rs50 million. One of the genuine concerns was that the FBR may end up exploiting the people in the absence of a credible online platform to determine the eligibility of the people to make these purchases. Because of this reason, the National Assembly Standing Committee on Finance had linked the implementation of these harsh conditions with the effectiveness of the online platform. The finance minister also announced to exempt a residential property owner from payment of up to 6.5% withholding tax at the time of sale, if the property is sold after retaining it for at least 15 years. He said that the government would not tax post-retirement benefits in the shape of commutation and gratuity. But the annual pension of over Rs10 million will be taxed at the rate of 5%. On the instructions of the prime minister, pensioners over the age of 75 are exempt from all types of taxes, he added. The government, in its bid to promote affordable housing, would launch a 20-year loan scheme for the low-income segment, informed Aurangzeb. He stated that individuals earning between Rs600,000 and Rs1.2 million annually will now be taxed at just 1% -- from 2.5% proposed in the budget. He added that the proposed 18% GST on solar panel imports has been lowered to 10% but said that it would increase the prices by only 4.6%. Aurangzeb informed the lower house that on the special instructions of the prime minister, the existing powers of the FBR regarding tax fraud and the amendments made through the Finance Bill were reviewed again, under which tax fraud has been categorised into cognisable and non-cognisable offences. "In cases involving up to Rs50 million, the FBR will not be able to arrest without a court warrant," he said. In addition, the person can be arrested only if he does not become a part of the inquiry despite three notices; the accused tries to escape; or tampers with the record. He said that the approval for arrest will be given by a high-level three-member committee of the FBR, instead of an officer, and it will be necessary to present the arrested persons before the court of a special judge within 24 hours," he said.
Business Recorder
6 days ago
- Business
- Business Recorder
Aurangzeb unveils new tax measures, targets poultry, mutual funds & govt securities
Finance Minister Muhammad Aurangzeb unveiled new taxation measures, including levies on income generated from mutual funds and government securities, at the National Assembly on Monday. Addressing the lower house, the finance minister presented three more budget proposals. 'The first of these is to increase the tax rate on income derived from the debt portion of mutual funds issued to companies from 25% to 29%. Secondly, it is proposed to impose a 20% tax on profits made by corporations and companies on investments in government securities,' he said. The government has also proposed to tax the poultry sector, said Aurangzeb. 'It is proposed that a Federal Excise Duty (FED) of Rs10 per day-old chick should be imposed on hatchery chicks, so that this sector can also contribute to the national exchequer,' he said. The finance minister maintained that the government has presented a balanced budget for the fiscal year 2025-26. 'On one hand, we have kept government expenditure under control, while on the other, much emphasis has been laid towards increasing tax base and its compliance,' said Aurangzeb. Imported cotton yarn: APTMA hails 18pc sales tax imposition Aurangzeb said that tariff rationalisation is vital, stating: 'By lowering import duties, our business unit cost would decrease, which will facilitate exports.' He said that the government will soon announce an industrial policy, whereas consultation on EV policy has already been initiated. Moreover, the government, in collaboration with British Asian Trust, would soon launch Pakistan's first Skill Impact Bond (SIB). The SIB links funding to the achievement of outcomes, he said. Affordable Housing The government, in its bid to promote affordable housing, would launch a 20-year loan scheme for the low-income segment, informed Auranzgeb. He clarified: 'Only those dams will be pursued that are already approved.' On Saturday, Aurangzeb, in his address to the Senate, announced key relief measures in the federal budget for FY2025-26, including a significant income tax cut for the salaried class and a reduction in General Sales Tax (GST) on imported solar panels. The finance minister, on Monday, reiterated that individuals earning between Rs600,000 and Rs1.2 million annually will now be taxed at just 1%, down from 2.5% proposed in the budget for FY2025-26. He said that tax has been imposed on individuals receiving an annual pension of over Rs10 million, while, on the special instructions of the Prime Minister of Pakistan, pensioners over the age of 75 are exempt from all types of taxes. Aurangzeb added that the proposed 18% GST on solar panel imports has been lowered to 10%. Powers of FBR Aurangzeb informed the lower house that on the special instructions of the Prime Minister, the existing powers of the FBR regarding tax fraud and the amendments made through the Finance Bill were reviewed once again, under which tax fraud has been categorised into cognizable and non-cognizable offences. 'In cases involving up to Rs50 million, the FBR will not be able to arrest without a court warrant,' he said. In addition, any one of the following conditions must be fulfilled for arrest: 1) the accused deliberately did not become a part of the inquiry despite three notices; 2) the accused tries to escape; and 3) tampers with the record. 'Despite this, the approval for arrest will be given by a high-level three-member committee of the FBR, instead of an officer, and it will be necessary to present the arrested persons before the court of a special judge within 24 hours,' he said. In addition, it will be ensured that no citizen is abused in this process, he added. Real estate sector In the real estate sector, Aurangzeb noted that in the past, people used to buy large properties beyond their declared financial means. Under Section 114C of the Income Tax Ordinance, the Finance Bill proposed to prohibit such people from engaging in large financial activities. 'On the instructions of the prime minister, this new law will not apply to the purchase of residential plots or houses worth up to Rs50 million, commercial plots or properties worth up to Rs100 million and vehicles worth up to Rs7 million,' said the finance minister. Aurangzeb said that the ongoing tensions between Iran Israel are expected to disturb the region's economic situation. However, the government is prepared to deal with any situation, he assured the lower house.
Business Recorder
19-06-2025
- Health
- Business Recorder
Health system suffers as cigarette tax left untouched
The federal budget for 2025-26, announced amidst a backdrop of fragile economic recovery, signals a continuation of fiscal restraint. While the government has rightly focused on maintaining macroeconomic stability and ensuring essential current expenditures, the significant reduction in the health sector's development allocation raises serious concerns about the country's long-term human development and economic resilience. According to the budget documents released by the Ministry of Finance, the Public Sector Development Programme (PSDP) allocation for health has been reduced by 16 percent, from approximately Rs 54.7 billion in the previous year to Rs 46.1 billion in the current fiscal cycle. This is not just a numerical adjustment; it has real and immediate implications. Development allocations typically fund the expansion of healthcare infrastructure, procurement of new equipment, training programmes, and the rollout of disease prevention and surveillance systems. A cut of this magnitude effectively means that many of these critical initiatives will be scaled back or shelved. From an economic standpoint, this trend is deeply concerning, because health is not just a social good, it is a foundational pillar of economic productivity. A healthy population is more capable, more employable, and less financially burdened. Countries that underinvest in health eventually pay the price in terms of lost productivity, increased poverty, and heightened vulnerability to public health emergencies. In Pakistan's case, where over 50% of health expenditure is still borne out-of-pocket by households, reducing development spending can further widen inequalities and push more families into financial hardship due to medical costs. What makes this budget decision even more concerning is that it comes at a time when Pakistan faces a dual disease burden: persistent infectious diseases on one hand, and rapidly increasing non-communicable diseases such as diabetes, cardiovascular conditions, and mental health disorders on the other. Development funding is crucial to building the institutional capacity needed to tackle this complex mix of health challenges, especially in under-served rural and peri-urban areas. The budget also misses an important opportunity to introduce health-related fiscal reforms. Despite strong evidence linking ultra-processed foods and sugary drinks to growing rates of non-communicable diseases, the government has chosen not to impose any new taxes on these items. This is a missed opportunity to both generate additional revenue and steer consumer behaviour toward healthier choices. Globally, such taxes have proven effective in improving public health outcomes while creating fiscal space for investment in health systems. Additionally, the budget maintains the existing two-tier Federal Excise Duty (FED) structure on cigarettes, with no increase in tax rates. The upper-tier remains at Rs 16,500 per 1,000 sticks, and the lower-tier continues near Rs 12,500 per 1,000 sticks. This effectively keeps cigarette prices static in real terms, despite inflation and rising disposable incomes. From a public health standpoint, this decision represents a clear deviation from evidence-based fiscal strategy. Maintaining cigarette excise rates at current levels ignores a growing body of economic and health research suggesting that increasing tobacco taxes not only reduces consumption but also substantially increases government revenue. For example, a targeted increase of Rs 39 per pack, raising the average rate to around Rs 140 for economy brands and Rs 369 for premium brands, could reduce cigarette consumption by nearly 7 percent and bring in an estimated Rs 67 billion in additional revenue. This revenue could be directly reinvested in health services, disease prevention programs, and infrastructure. The government's decision to hold back on increasing cigarette taxes, despite the health risks and economic opportunity, reflects a worrying pattern of inaction. It suggests that political considerations or lobbying pressures may have outweighed long-term fiscal and health imperatives. In a country where tobacco consumption contributes to over 160,000 deaths annually and disproportionately affects the poor, failing to revise cigarette taxes is a missed chance to use fiscal tools to improve both public health and equity. Similarly, the absence of new taxes on sugary beverages and processed foods, despite their well-documented contribution to Pakistan's growing non-communicable disease crisis, reinforces the perception that the government has shied away from confronting powerful industry interests. This reluctance undermines broader efforts to promote preventive health and reduce long-term medical costs, which are increasingly borne by low- and middle-income households. From a macroeconomic perspective, the budget's overall trajectory leans toward short-term fiscal stability but lacks the bold, forward-looking investments needed to address structural vulnerabilities. While allocations for debt servicing and defense remain protected, social sector development, particularly in health, continues to be deprioritized. This imbalance suggests a recurring policy bias that views health as a discretionary expense rather than a strategic investment. In times of economic constraint, governments face difficult choices. However, smart fiscal policy does not mean cutting essential development expenditures, it means spending more wisely and protecting sectors that yield long-term returns. Health is one such sector. Delayed infrastructure, inadequate surveillance systems, and a weakened public health response capability may not show immediate consequences in budget sheets, but they will manifest in slower human capital development and greater costs down the line. Conclusively, while the Budget 2025-26 reflects a certain degree of fiscal discipline, the decision to reduce health sector development spending and to leave cigarette taxation untouched is both short-sighted and economically risky. Pakistan cannot afford to treat health as a secondary priority. A more strategic and balanced approach is needed, one that protects and promotes public health as a critical enabler of sustained economic growth and national resilience. Copyright Business Recorder, 2025
Business Recorder
19-06-2025
- Business
- Business Recorder
Sales Tax cut on solar panels import: Rs20bn revenue hit expected
ISLAMABAD: The government is all set to abolish sales tax on the import of solar panels having revenue impact of Rs 20 billion in 2025-26. Another proposal is to reduce proposed sales tax from 18 percent to 10 percent on the import of solar panels. There is a strong likelihood of total abolition of the proposed 18 percent sales tax on solar panels. The Federal Board of Revenue (FBR) is finalizing alternate revenue measures of the same amount to be presented before the Prime Minister for approval. The FBR may propose increase in Federal Excise Duty (FED) on the imported vehicles or review lower rates of sales tax on some items in the Eight Schedule (Conditional Exemption) or Sixth Schedule (Exemption Schedule) of the Sales Tax Act. Copyright Business Recorder, 2025
