In consultation with the Department of Health, the Federal Revenue Board (FBR) has decided to impose federal excise duties (FED) on unsanitary items such as cigarettes in the next federal budget.
According to the Revenue Division Yearbook (2019-20), the imposition of federal excise duties is not only intended to collect tax revenue, but also to discourage the use of certain harmful health products, such as cigarettes. In consultation with the Department of Health, other unsanitary items may be identified with the aim of collecting DEF in the coming years to discourage their use.
The main producers of the Fed’s revenue are cigarettes, cement and beverages, he added.
Senior RBF officials told Lahore Herald that the government can use the Fed to generate additional revenue. This can be done by raising the Fed on drinks and other unhealthy items. Imposing the FED on other posts could be considered in the next federal budget, they added.
RBF officials further said the RBF would listen to the health ministry’s position, taking into account the revenue implications of each proposal. The FBR may consider items declared unhealthy by the ministry to impose or increase the FED.
The FBR Directory indicates that nearly 90% of the EDF collection in 2019-2020 consists of ten items. The share of cigarettes has risen from 37.9% to 34.8%, but is still at the top. The second largest contributor is cement and its share rose from 24% to 28%, third in air transport, whose share increased from 17.3% to 11.6% during the analysis period.
Other key items include concentrates, sparkling water, oil exploration, automobiles, food products, dairy products, and fruit or vegetable juices for 2019-2020.
In the latest federal budget (2020-2021), the FBR imposed an ad valorem federal tax of 7.5% in the case of locally produced double cab pick-ups (4X4) and 25% in the case. of imports, increase of EDF on imported cigars, cigars and cigarillos and cigarettes from 65 to 100 percent of the sale price, increase of EDF on filter rods from Rs. 0.75 to Rs. 1 per rod of filter, federal tax on e-liquids on electric cigarettes at Rs. 10 per ml, and an FED tax on energy drinks containing caffeine at a rate of 25 percent.
Later, 25 percent of the EDF was removed from energy drinks.
The Fed on cement was cut from Rs. 2 per kg to Rs. 1.75 per kg by the Finance Act of 2020.
In the budget (2019-2020), packaged non-carbonated drinks with sugar, such as juices, syrups and squash, were subject to EDF at 5% of the retail price and the EDF for beverages increased from 11.5% to 13%.
In the past, the Department of Health sent a summary to the Cabinet’s Economic Coordination Commission (ECC) without consulting the Federal Revenue Board (FBR) about imposing the “sin tax” on the tobacco industry. and drinks. .
However, the ECC did not address the Ministry of Health’s summary of the “tax on sin” on cigarettes and soft drinks at its meeting. At that point, the government dropped the proposal to impose an additional Fed on drinks.