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Business Recorder
3 days ago
- 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
3 days ago
- 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
Business Recorder
4 days ago
- Business
- Business Recorder
Presentations to NA, Senate panels: Juice industry urges govt to lower FED to 15pc
ISLAMABAD: The Fruit Juice Council (formally juice industry) Tuesday urged upon two parliamentary panels to reduce 20 percent Federal Excise Duty (FED) to 15 percent on the juice industry to generate higher revenues during 2025-26. According to two different presentations given to National Assembly Standing Committee on Finance and Senate Standing Committee on Finance here on Tuesday at Parliament House, the budget proposes that the reduction in price on account of chilling charges be lowered from 10% to no more than 5% of the price. This will increase the burden on the manufacturers even more. Instead of reducing the FED on fruit juices, the fruit juice and beverage industry has been burdened further. The FJC strongly urges the government to reverse this budget proposal. The Fruit Juice Council, a body representing the formal juice industry, believes that the government should reduce the FED rate of 20% imposed on the juice industry to 15%, if it wants a higher revenue than the outgoing financial year. The current 20% FED (on top of existing 18% GST) has stalled the juice industry's growth and in FY2024-25 the government's revenue projections fell short of its own expectations. This indicates that the juice industry has hit the Laffer Curve (where the taxation is so high that it results in sharp decline of sales, ultimately affecting government revenue). In line with local regulations, fruit drinks have minimum 5% fruit content, nectars have 25%-50% fruit content and pure juices have 100% fruit content. Fruit-based juices are a healthier option since they contain the goodness of fruits. Punjab and Sindh Food Authorities allow the sale of fruit-based juices in educational institutions while restricting sales of any other beverages. Copyright Business Recorder, 2025
Express Tribune
4 days ago
- Business
- Express Tribune
Juice industry urges cut in FED to boost revenue
Listen to article The Fruit Juice Council (FJC), representing the formal juice industry, has urged the government to reduce the 20% Federal Excise Duty (FED) on juices to 15% to generate higher revenue than the outgoing financial year. The current 20% FED, in addition to 18% GST, has stalled industry growth. In FY2024-25, government revenue projections fell short, suggesting the industry has hit the Laffer Curve — where high taxation leads to lower sales and declining revenue. Under local rules, fruit drinks must have at least 5% fruit content, nectars 25-50%, and pure juices 100%. These juices are healthier due to their fruit content. Punjab and Sindh Food Authorities permit the sale of fruit-based juices in schools while restricting other beverages. Due to falling sales, fruit procurement dropped below 2017 levels. Only 20,233 tonnes of mangoes were purchased last year compared to 31,000 tonnes in 2017-18, hurting farmers and pulpers. While the government claims it supports a documented economy, such policies contradict that goal. The 20% FED and 18% GST are driving consumers toward low-priced, low-quality, and potentially unsafe options from the undocumented sector, which continues to grow. The budget also proposes capping the chilling charge adjustment at 5% instead of 10%, further burdening manufacturers.
Business Recorder
5 days ago
- Business
- Business Recorder
Budget 2025–2026: A hope for progress or a storm of inflation?
In Pakistan, the annual budget is seen as an opportunity for the government to express its economic priorities and development strategies. The current government has presented the fiscal year 2025–2026 budget at a critical juncture when the country is facing an economic crisis, rising debt, inflation, and a water emergency. This budget will not only impact the daily lives of the people but also determine the future direction of Pakistan. In this column, we compare the current budget with the previous two budgets (2023–2024 and 2024–2025), while also analyzing its potential effects on various social and economic classes. Comparative Analysis of Budgets 2023–2024, 2024–2025, and 2025–2026: In the 2023–2024 budget, the total size was PKR 14.5 trillion, with a revenue target of PKR 9.2 trillion. This increased to PKR 16 trillion in 2024–2025, with a revenue target of PKR 10.2 trillion. The 2025–2026 budget now stands at PKR 18.5 trillion, with a tax collection target of PKR 12 trillion. The fiscal deficit was 7.6 percent of GDP in 2023–2024, reduced to 6.9 percent in 2024–2025, but is expected to rise again to 7.2 percent in 2025–2026, which is an alarming indicator. The current account deficit stood at $2.8 billion in 2023–2024, which improved to USD 1.9 billion in 2024–2025. However, due to an expected increase in imports and a decline in exports, it is projected to reach USD 3.1 billion again in 2025–2026. Impacts on Different Social Classes: Lower-income Class: This year, PKR 400 billion has been allocated for the Ehsaas Program, up from PKR 360 billion last year. However, subsidies have been cut by 18 percent. The increase in electricity and gas prices will hit this class the hardest. Middle Class: New income tax slabs have been introduced for salaried individuals, increasing the burden on those earning over PKR 80,000 per month. There is no significant relief in educational expenses. Upper Class: Tax has been increased on purchase of luxury items, large houses, and expensive cars. However, no significant increase has been made in capital gains tax, keeping the investor class largely unaffected. New taxes and their impact: Federal Excise Duty (FED) increased on cigarettes, sugar, and soft drinks. A 2 percent rise in income tax on annual incomes above PKR 1.5 million. The 35 percent withholding tax on non-filers. A fixed tax scheme introduced for small traders. These tax measures will indirectly burden the poor and middle class, while the lack of expansion in direct taxation limits the pressure on the elite class. Trade deficit: The government expects the trade deficit to reach $28 billion in 2025–2026, higher than $25 billion in 2024–2025. The deficit is widening due to limited export growth and rising imports. Increased taxation instead of relief on industrial raw materials may worsen the situation. IMF pressure: Under the $3 billion IMF program, several tough measures have been adopted in the current budget, including: Cuts in energy subsidies, Increase in electricity tariffs, Implementation of an automated revenue collection system. Around 80% of the budget decisions align with IMF recommendations, drawing criticism that such moves could harm local industries and public welfare projects. Poverty and unemployment: The proportion of people living below the poverty line is expected to rise to 39 percent this fiscal year, up from 36 percent in 2024. Decreased job opportunities, additional burden on SMEs, and rising inflation may increase unemployment. Fuel, electricity, and water bills: A PKR 20 per liter increase in petroleum levy is expected after the budget. A 15 percent increase in electricity base tariffs has been proposed. PKR 85 billion has been allocated to tackle the water emergency, including the construction of dams, rainwater storage, and water recycling projects. Development vs. non-development expenditures: Development Budget: PKR 1.4 trillion (PKR 1.15 trillion in 2024–2025). Non-Development expenditures: PKR 6.5 trillion. 60 percent of the development budget is allocated at the federal level, while 40% is for the provinces. However, weak monitoring mechanisms limit its impact at the grassroots level. Foreign investment: The government has attempted to attract foreign investment through special economic zones and relaxed digital taxes. However, political instability and judicial uncertainty remain major hurdles for investors. Other key aspects of the budget: PKR 60 billion allocated for combating climate change. Extension of tax exemptions for the IT sector andPKR 50 billion allocated for youth skills development programs. Conclusion and recommendations: While the budget sets a direction for the economy, it reveals several gaps when matched against ground realities: Limited expansion of direct taxes leaves the wealthy class largely unaffected. The poor and middle class are likely to face more hardships. Greater transparency and monitoring are essential for effective development spending. The government must expand the tax net, curb corruption, and promote local industry and agriculture to build a sustainable economy. Restoring public trust will require not a superficial but a transparent, fair, and balanced budget. (The writer can be contacted on [email protected]) Copyright Business Recorder, 2025
