KATHMANDU, May 8: The government has shown leniency towards the cigarette and tobacco industry, despite pressure from various international bodies and domestic research centers to raise taxes on these products.
It has been revealed that under the influence of tobacco and cigarette dealers and industrialists, the government has not adhered to the World Health Organization (WHO) standards. The WHO has set a standard of charging 75 percent of the sales price of cigarettes and tobacco products as taxes.
The activists accuse the government of failing to raise taxes under the influence of the tobacco industry. Engineer Sagar Mani Khadka mentioned that every year, the government announces a slight tax increase on tobacco and cigarettes in the budget, but it amounts to little more than a token gesture.
According to WHO standards, it is mandatory to impose a minimum tax of 75 percent on tobacco products. Engineer Khadka said, “In Nepal, it has barely reached 33 percent,” he said, "In the 2023/24 fiscal year, the tax on tobacco and cigarettes increased by just three percent, the lowest increment in years.”
He said that the government's reluctance to raise tobacco taxes disregards recommendations from various researchers and the national and international community. This approach not only affects public health but also harms the country's economy. Compared to WHO standards, Nepal’s tobacco tax rate is very low, especially when compared to neighboring countries.
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According to a study conducted by Health Rights and Tobacco Control Network Nepal in 2023, Sri Lanka imposes 77 percent tax on tobacco products, while Bangladesh imposes 73 percent, Pakistan 61 percent and India 58 percent.
Due to the low tax levied on tobacco products, Nepal faces increased incidents of theft and smuggling, resulting in substantial losses in customs revenue.
Government officials stated that due to the reluctance to increase tobacco taxes under the influence of tobacco traders, the government could not take the necessary decision regarding tax increase.
However, various health organizations and experts suggested a substantial increase in tobacco taxes to deter consumption and generate additional revenue. In order to increase the source of revenue, there is also a discussion within the Ministry of Finance about the need to increase the tax rate on tobacco. During the discussions, experts pointed out that the tax increase on tobacco has only become ritualistic.
The WHO has taken tax as the main measure among the six effective measures to control tobacco and cigarettes. In the study report published by the National Cancer Institute (NCI), in the ‘Economics of Tobacco and Tobacco Products Control,’ tax increases are considered as a popular and effective way to control consumption rates of tobacco products. It is mentioned in the study that if the price of such goods increases by 10 percent, the consumption rate will decrease by five percent.
Despite annual tax revenues of Rs 5 billion to Rs 7 billion from tobacco and cigarettes, the economic burden of tobacco-related diseases far exceeds this figure, amounting to over Rs 40 billion annually.
While Nepal has enacted laws for tobacco control, lax implementation remains a challenge. Due to this weakness, the activists stated that this enforcement gap provides opportunities for tax evasion. They urged the government to take decisive action by ruthlessly increasing taxes on tobacco and cigarettes as it prepares the budget for the upcoming fiscal year.
Nepal ratified the International Convention on Tobacco Control in 2003 and enacted the Tobacco Product Control and Regulation Act in 2011, signaling its commitment to tobacco control measures.
