Why Tobacco is a Source of Economic Corruption in Pakistan
November 10, 2017
British American Tobacco is famous for controlling governments through lobbying and manipulating tax structure for higher profits.
Pakistan has faced the brunt of violent religious extremism almost for more than a decade now; however, since its independence it has been continuously exploited and has faced financial terrorism from all the Multinationals Companies in general and British American Tobacco in particular.
British American Tobacco, a British multinational tobacco company based in London, is famous worldwide for controlling governments through intense lobbying activities and manipulates tax structure to for higher profits.
Currently British American Tobacco has been under investigation by Serious Fraud Office United Kingdom for allegations which surfaced against it in East Africa where it has been accused of making illegal payments to politicians and civil servants. BAT had to issue a statement after the news of investigation surfaced.
“We have been co-operating with the Serious Fraud Office (“SFO”) and British American Tobacco (“BAT”) has been informed that the SFO has now opened a formal investigation. BAT intends to co-operate with that investigation.”
This has happened since long in Pakistan too, however, BAT has been able to manage its corrupt practices. In early 2015 the British High Commissioner was accused of attending lobbying meeting in which British American Tobacco (BAT), the parent company of Pakistan Tobacco Company (PTC), lobbied Finance Minister Ishaq Dar and Minister of State for National Health Services Saira Afzal Tarar.
The meeting was aimed to convince Dar and Tarar to drop the government’s plan to print larger pictorial health warnings on cigarette packs. Though the then High Commissioner Barton has drawn harsh criticism from campaigners and medical experts in UK, however, the news went unnoticed here in Pakistan except being reproduced by one of the English language newspaper which was originally published in Financial Times.
Mr. Kamran who is an anti-tobacco campaigner said that BAT involvement in manipulating local laws has been quite obvious in many cases in recent past. He said that recently as a result of BAT lobbying, the Ministry of Finance proposed a third tier with the purpose to increase revenues from Tobacco products, however, in reality the slab was introduced to benefit BAT. The introduction of third tier/slab will actually result in increase sale of Tobacco products amounting to a total disregard for WHO Framework Convention on Tobacco Control he said.
On inquiring from FBR it was revealed that before there have been two tiers of taxation consisting of an upper tier and a lower tier. The upper tier tax was applied to tobacco products with a price above Rs. 72 and the lower tier tax was applied to tobacco products with a price below Rs. 72. The tax applied to products in the upper tier was Rs. 63.10 whereas the tax applied to the lower tier was Rs. 28.40.
Keeping in view WHO FCTC the MNHS recommended the Finance Ministry to raise the tax on the lower tier to Rs. 44 as tobacco products in this tier were consumed by almost 80% of consumers. Though the suggestions were agreed upon by the MoF, yet MoF, under the influence of British American Tobacco, introduced a third tier of taxation. Under this tier of taxation, tobacco products below the price of Rs.50 will draw the new tax at the rate of Rs.16. The BAT and FBR nexus has been highlighted in a recently published article in The News an English language daily. According to it “This provision has helped cigarette companies boost their sales.
For example, the British American Tobacco lowered the prices for its top three highest selling brands to below Rs50. The applicable lax therefore reduced from Rs32.98 (as per the new second tax tier) to Rs16 (as per the new third tax tier). The equation is simple: the lower the price more is the demand.”
This has also been confirmed from market survey. Mr. Adil who runs a tuck-shop in Karachi said, “The prices of Capstan by Pall Mall, Gold Flake and Embassy have been reduced drastically after this year budget which is very unusual.” He further conceded that the sale of these three cigarettes brands have gone many fold.
Zahra Kazmi is a researcher, freelance writer, and a social activist. Most of her writings are about women and children’s rights, social and gender issues.