April 27: A study conducted by the Nepal Development Research Institute has shown that taxes are being levied on tobacco products at low rates in the country. In fact, the tax rate imposed by the government on tobacco products in Nepal is lower than that of neighboring countries.
According to the study, more than 27,000 people die annually from diseases caused by the use of tobacco in Nepal. Therefore, it has been recommended to raise the tax rate on tobacco products. According to the study conducted by the institute, the highest selling brand of tobacco in India in 2008 was taxed at 45.76 percent of the retail price. In 2018, this tax rate increased to 54.04 percent.
The study believes that the prevalence of tobacco products in India is the result of high tax imposition. However, it also found that the tax in Nepal was 24.27 percent in 2008 and only 30 percent in 2018.
“Taxes are a very effective tactics to control tobacco. However, due the government's presumption that raising taxes would encourage illegal trade, the rate of taxes in Nepal is not increasing,” the report states.
The study report also states that the use of tobacco has direct impact on healthcare cost. It also has a negative impact on the productivity of the family. According to the report, 1.4 percent of the annual GDP is lost due to tobacco.
“Increasing the tax rate on tobacco products is a win-win situation. Taxes reduce consumption and improve public health, reduce economic losses and benefit the government.”
The report states that due to the increase in taxes, the price of tobacco products will increase and consumption will decrease. “Raising the tax rate automatically increases the revenue. Despite this reality, the tax rate on tobacco products in Nepal is very low and these products have become very affordable in the last few years.” The study has disproved the notion that raising taxes on tobacco products will increase illegal trade. During the study, only the prevalence of 0.33 percent illegal cigarettes was found in Nepal.
Of the 4,300 packs of cigarettes inspected in 11 districts including all three geographical subdivisions of the nation, only 0.33 percent was found to be illegal. Most of the illegal cigarettes are manufactured in Indonesia and most of them were found in Kathmandu and Pokhara, far from the Nepal-India border. The excise duty sticker certified by the Inland Revenue Department was not affixed on the illegal packets.
The general secretary of the research institute, Dr. Jaya Kumar Gurung said that the study dismissed the assumption that the imposition of additional tax on tobacco products would increase the illegal trade. According to him, it is necessary to impose additional tax to reduce the use of tobacco products.
With the approval of the Nepal Health Research Council, the institute conducted a nationwide study in order to check the level of illegal trade of cigarettes.