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Economists urge tobacco tax hike to meet Modi’s $5 trillion economic vision – Mintpaisa

In India, the tax on cigarettes is 52.7%, bidis 22% and chewing tobacco 63.8%.  Case

In India, the tax on cigarettes is 52.7%, bidis 22% and chewing tobacco 63.8%. File | Photo credit: PTI

A substantial increase in taxes on all tobacco products and stricter laws will not only make the most of human capital by ensuring better health for citizens, but will also contribute to the realization of Prime Minister Narendra Modi’s vision of a five trillion dollar economy by 2025, experts say. affirmed.

Noting that the health care burden due to tobacco use in India is about 1.04% of GDP, pushing many people into poverty, Arvind Mohan, professor and head of the economics department at the University of Lucknow, said a substantial increase in the tax on these deadly items will close the hole.

Speaking in a webinar, he echoed the views of the World Health Organization (WHO) as well as many other international bodies like the World Bank that tobacco taxation is an effective tool, reducing tobacco consumption faster than any other single measure.

Read also | The drop in tobacco production creates competition between buyers; prices hit historic high

Mr. Mohan explained that currently, health is a big challenge for human development because at least 70% of health expenditure is covered by the public itself, while only 25-30% is covered by the government and global institutions.

“But if we manage to reduce this expenditure by imposing a tax on tobacco products, we will not only be able to capitalize our human resources, but also multiply by several times the GDP. It will also help us realize our dream of a $5 trillion economy,” he said.

Mr. Mohan with Dr. Pritam Datta, Fellow of the Delhi-based National Institute of Public Finance and Policy (NIPFP) and Rijo M. John, Economist and Public Health Policy Analyst, ahead of the Union Budget 2023-24, also pointed out that while one of the main arguments for introducing the Goods and Services Tax (GST) in 2017 was that it would contribute 2% to GDP growth, but in reality this did not happen.

Read also | Extinguishing the Tobacco Industry Main Narrative

The near-zero increase in taxes on products of sin like tobacco is one of the main reasons, they said during an interaction with senior journalist Shishir Sinha owned by ‘Tobacco Free India’, a platform group of concerned citizens.

Economists have strongly suggested that rising inflation, which has put pressure on the country’s budget, and the urgent need for new money can be met by levying taxes on demerit commodities like tobacco.

Dr. Datta also talked about the reasons for the lowering of tobacco taxes over the past five years since the introduction of the GST system.

“If we take a ratio on all taxes – Center and States – on tobacco, it will represent about 1.7% of the total taxes collected in India, while our study showed that it was 2.3% in 2014,” he said.

Mr. John is convinced that tobacco taxation can be a very effective tool for generating revenue, as the product is elastic in nature, a high tax will have no negative impact on government revenue.

He further argued that India is among the 182 countries that have signed the WHO Framework Convention on Tobacco Control which recommends a tax of at least 75% on the retail price of all tobacco products. tobacco. However, in India the tax on cigarettes is 52.7%, bidis 22% and chewing tobacco 63.8%, he added.

According to Global Adult Tobacco Survey-India (GATS -2016-17), nearly 27 million adults aged 15 and above use tobacco in one form or another. India is the second largest consumer and the third largest producer of tobacco.


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