The newly elected government of Pakistan, led by Prime Minister Imran Khan, is planning to implement bold reforms in taxation. These reforms are seen as a precondition for international assistance and necessary for the government to escape the balance of payment crisis. In order to meet his economic crisis, Khan visited several countries for financial aid. However, countries like China, UAE, and Saudi Arabia provided a large amount of aid to the Pakistani government to overcome the financial crisis.
However, there is evidence of widespread tax evasion across the country, where less than 1% of Pakistan’s 200 million people pay income tax. Apparently, the people cheat the taxation department in many ways. According to the officers of Federal Board of Revenue, “it is common for people who sell property to report the sale price to be a third or half what it actually was. Besides that in daily business transactions, it’s very common for the actual amount to be under-declared so that tax payments are massively evaded”.
As per Asad Umar, the finance minister of the new government of Pakistan, reforming tax collection would be the central part of our economic policies. More than 90% of tax revenue come from indirect taxes, which hit everyone uniformly; while only 10% comes from income tax. Meanwhile, Pakistan is going to impose a sin tax on the following of national health services. In Urdu translation, sin tax is called as “Gunnah tax” which would be imposed on cigarettes and sugary beverages which would in turn be diverted to the health budget.
Earlier, it was suggested several times in the past that sin tax should be imposed all the products which are harmful for the health. Because of health related issues, the state has to pay heavy penalties in the shape of healthcare spending and lowered human productivity.
According to the director general of the national health services, Dr Asad Hafeez, the tax on tobacco and sugar beverages is already implemented in 45 countries and Pakistan is going to implement it. The United States of America charges 1.5 USD per pack of cigarette. While the United Kingdom charges around 40 pence per litre of sugar beverages as sin tax, Thailand as well as other countries are having similar taxes imposed for health care services. He further said that Pakistan have not yet decided the exact amount for a sin tax, but it will be certainly a good amount. The general secretary of the Pakistan National Heart Association (PANAH), Sanaullah Ghumman, said that his association had for many years been demanding the imposition of a sin tax.
On Twitter, the PTI minister Faisal Vawda tweeted that “I’m a chain cigarette smoker myself and I appreciate all the measures taken by the government to discourage smoking and I understand it’s injurious to health but this term ‘Gunnah Tax’ is inappropriate”. Meanwhile, the sin tax have sparked an outcry on social media. Some came in support, while as others have termed it as injustice.
Last year in October, the United Arab Emirates (UAE) also started imposing taxing on soft drinks and cigarettes, in order to curb the consumption of harmful products and attempts to introduce new source of state income. India imposes a sin tax on gutka and paan masala, and the sums thus collected are spent on the healthcare sector since these products cause illnesses that become a burden on the public exchequer. As per the reports of Health professionals American Heart Association, World Health Organisation, and the Mayo Clinic, these taxes are critical in helping to change behaviour and improve health.