Higher taxes on tobacco demanded

By A Staff Reporter,Kathmandu, May 25: Action Nepal has raised concerns over misleading information propagated by the Nepal Beverage and Cigarette Industry Association regarding tobacco taxation. 

According to Action Nepal, this misinformation aims to influence policymakers to favour industrial interests over public health.

At an interaction programme held in Kathmandu on Thursday, Anand Bahadur Chand, President of Action Nepal, criticised the beverage and cigarette industries for spreading false claims about their contributions to national revenue. “The confusion spread by beverage companies, which oppose further tax increase and spread misinformation, is completely wrong,” said Chand.

Nepal imposes a relatively low tax rate on tobacco products. The World Health Organisation (WHO) recommends a minimum tax rate of 75 per cent on tobacco products, but Nepal’s rate has not exceeded 33 per cent. Experts indicate that this rate has recently fallen to 28 per cent due to rising inflation. Despite claims by the cigarette industry that taxes on various brands reach up to 71 per cent of the sale price, actual rates remain much lower.

According to the latest statistics, more than 37,000 people die annually in Nepal due to diseases caused by tobacco consumption. Action Nepal argues that increasing tobacco taxes would not only curb consumption but also significantly boost government revenue.

Dr. Pamir Gautam, research officer at Action Nepal, said, “Studies conducted in various countries have shown that the more expensive the cigarettes become, the lower the consumption and the higher the collection of revenue. Nepal has the lowest tax rates in South Asia, and here cigarettes and other tobacco products are the cheapest. This has not reduced the consumption rate.”

To control this, the tax rate on tobacco products needs to be increased to the WHO-recommended level, he added. According to Dr. Gautam, if the excise duty is raised to Rs. 4 per stick, it would increase the revenue to Rs. 45.07 billion, which is nearly Rs. 19 billion more than the current collection.

The current health risk tax of 60 paisa per stick brings in Rs. 6.76 billion, said Gautam, and he added that increasing this tax to Rs. 3 would raise health risk tax revenue to Rs. 33.80 billion.

Chand said that the government needed to adopt WHO recommendations and increase tobacco taxes in the upcoming budget. If implemented, the tax collection from tobacco products would reach Rs. 78.87 billion from the current Rs. 32.98 billion. He urged the government to implement a combined tax of 75 per cent, comprising 42 per of excise duty, 20 per cent of health risk tax, and 13 per cent value-added tax (VAT).

Chand also raised concerns about potential illegal smuggling if taxes are increased. He said that the police recently seized 1,280 packets of Khukuri cigarettes smuggled from Nepal to India, indicating that illegal exports are already a problem.