The syntax of sin tax

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The Ministry of National Health Services, Regulations and Coordination (NHSRC)

plans to impose this tax on tobacco and sugary drinks to generate funds to increase the
health budget. The sin tax is not a standalone measure. It is part of a global
development agenda. As per the National Health Vision 2016-2025, “federal and
provincial governments will develop joint strategies to enhance resource mobilisation
for health from official development assistance/international development partners,
private-sector engagement, and taxes, such as [the] sin tax”.

A sin tax has two components. First, it seeks to reduce the consumption hazardous
products that cause noncommunicable diseases. Second, once the tax has been
collected, the government dedicates financial resources to fund health campaigns. To
date, the government has restricted itself to the first stage. Now, it aims to bring about
a major policy shift, which is quite complex.

This complication was revealed during the last budget debate when the proposal for a
10 percent levy on tobacco products to generate funds for healthcare witnessed a
stillbirth in parliament. The central debate focused on the legal implications of this
measure – as it isn’t a fiscal measure – and whether a special law needs to be passed
by parliament to further this major policy measure.

If the sin tax is imposed, it will align Pakistan with the growing international
movements that dedicate funds received through taxes for development under
international instruments like the WHO Framework Convention on Tobacco Control
(FCTC), the Global Action Plan for the Prevention and Control of Noncommunicable
Diseases (NCDs), and the Addis Ababa Action Agenda.

NCDs – mainly cardiovascular diseases, cancer, chronic respiratory diseases and

diabetes – are the main causes of death across the world. More than 36 million people
die annually from NCDs (that’s 63 percent of global deaths), including more than 14
million people who die too young between the ages of 30 and 70. Low- and middle-
income countries already bear 86 percent of the burden of these premature deaths,
resulting in cumulative economic losses of $7 trillion over the next 15 years and
widespread poverty.

In Pakistan, the NHSRC recognises that the common underlying factors for non-
communicable diseases, including our lifestyle and nutrition, have not been addressed
adequately. The country is ranked seventh-highest in the diabetes prevalence list.
One-in-four adults over 18 years of age is hypertensive and smoking levels are high
(38 percent among men and seven percent among women). Rising but still
underestimated rates of cancer and cardiopulmonary disease remain largely ignored.
The higher intake of fats, salt, sugar and smoking are the major factors that contribute
to NCDs.

The centuries-old sin tax is usually imposed on liquor and on tobacco in Western
societies. Critics believe that it is legitimising sin. In Pakistan, under religious
sanctions liquor and opium are criminalised and banned. Tobacco is taxed. There are
multiple taxes on tobacco, such as the federal excise duty (FED), which the
government of Pakistan claims has been levied to reduce tobacco consumption.
Although there is no policy document to highlight this, this approach is mentioned in
the budget speeches of successive finance ministers.

In Pakistan, the rationale for FEDs is in sync with WHO recommendations: “effective
tobacco taxes contribute significantly to state budgets. Increasing tobacco taxes
generally further increases government revenues, as the increase in tax normally
outweighs the decline in consumption of tobacco products”.

If the consumption tax in Pakistan did create a reduction in cigarette consumption, it

has yet to be recorded. This tax needs to be linked to research evidence gather through
the Global Adult Tobacco Survey (Gats), the Global Youth Tobacco Survey (GYTS),
the Pakistan Demographic and Health Survey (PDHS) and the Household Integrated
Economic Survey.
Official statistics reveal that more than 98 percent of FED collections are obtained
from six major items in addition to cigarettes. Cigarettes constitute 33 percent of these
collections. Around 26.2 percent of collections come through cement, 21.8 percent
from services, 11 percent through beverages, 5.2 percent from natural gas, and 1.8
percent from edible oil.

FEDs constitute 8.9 percent of indirect taxes and 5.5 percent of the federal taxes
collected by the FBR. Collections from federal excise duties registered a growth of
just four percent during 2017-18 as compared with collections made during the
previous year. The net federal excise duties collected in 2017-18 stood at Rs205.9
billion as compared with Rs197.9 billion collected during the previous year.
Collection from cigarettes amounted to Rs67.139 billion.

As per estimates, the performance of cigarettes, services, beverages, and natural gas
hasn’t been satisfactory. The tobacco tax has its own complications. The government
is still struggling to ensure that every pack of cigarettes that is produced and
consumed in Pakistan is taxed.

Taxes on the cigarette industry are divided into two categories: duty-paid and duty-
non-paid (DNP). Taxpaying companies allege that higher taxes benefit the DNP
because counterfeit cigarettes are sold at a much lower price. Transnational companies
claim that DNPs captured 40.8 percent of their market in 2017. These transnational
companies won their argument with the FBR, which created a third tier in the existing
tax structure within the 2017-18 budget, reducing tax rates to make cigarettes prices
compatible with DNPs.

Concerns over DNPs and the third tier have been made by advocates of tobacco
control. These reservations were also echoed in the Senate Committee in early 2018 as
many believed that the third tier on cigarettes has made the item unattractive for the
local industry and has brought benefits for multinational companies.

Tobacco-control groups are of the view that counterfeit businesses should be curtailed
through strict laws. But the FBR, citing its limited financial and human resources,
controls such businesses through policy measures. Now the government has signed
the Protocol to Eliminate Illicit Trade in Tobacco Products, which aims to secure the
supply chain of tobacco products through licensing, due diligence and record-keeping.
It requires a global tracking system that will allow governments to follow-up on
tobacco products from the point of production to the first point of sale.

The WHO recommends countries to consider dedicating revenue to tobacco-control

programmes, such as those that promote health and disease prevention, and finance
appropriate structures for tobacco control. This movement has itself gained
momentum from the Addis Ababa Action Agenda, which identifies tobacco taxation
as a mechanism to increase resources to fund the implementation of the new
sustainable development goals. This marks a significant international development.

According to the latest report by the WHO, 25 countries have used revenue from
tobacco taxes to fund health programmes. But only 10 countries – Chile, Cook
Islands, Costa Rica, Iceland, El Salvador, Honduras, Iran, Panama, Poland, and
Vietnam – have directed resources towards tobacco control. Other countries also
utilise resources derived from tobacco taxation to promote health and prevent
noncommunicable diseases.

Euromonitor, a market research entity, reports that with the growing prevalence of
obesity and diet-related diseases, public awareness of unhealthy food and drinks
follows suit. Public health bodies are desperate to find solutions and sin taxes are
among the possible remedies.

Out of 19 countries that have enforced sin taxes on food or drinks, around 13 did so
during the last decade. However, an increasing number of countries are committed to
introducing sin taxes in the next year or two. Along with the recent WHO
recommendations on sugar taxes, all planned food/drink sin taxes will target sugary
soft drinks to reduce sugar consumption by up to 20 percent.

The writer is a freelancecontributor.

Email: nadympak@hotmail.com

How does poverty alleviation

work?
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Poverty alleviation programmes in Pakistan have failed to achieve the desired

outcomes over the years. When we look at the state of multidimensional poverty in
the South Asian context, Pakistan is among the worst performing countries in terms of
human development.

The worsening human development indicators coincide with Pakistan having one of
the best poverty alleviation programmes in the region during the last two decades.
Institutional decay, weakening political accountability, lack of distributive justice,
dwindling writ of the state and de-industrialization are some of the key factors to
neutralize the impact of poverty alleviation programmes over the years.

UNDP reports show that inequality in Pakistan has grown despite the fact that
consumption-based poverty has dropped from 57.9 percent to 29.5 percent between
1998-99 and 2013-14, and multidimensional poverty – which includes health,
education and living standards – has also fallen from 55.2 percent to 38.8 percent
between 2004-5 and 2014-15. However, there is a sharp increase of 5 percent in both
income and consumption poverty over the last eight months in Pakistan. This increase
is caused by huge economic mismanagement, lack of direction and the spill-over
effect of cumulative losses of revenue due to the lowering purchasing power.

From 1999 to 2018, income inequality and overall economic disparity in the country
increased from 30.5 to 41.1 on the Gini Index, which measures income inequality.
Income disparity has aggravated since 2000 with multiplying adverse impact on the
socioeconomic and cultural fabric of society. Macroeconomic and structural
impediments to development have undermined the transformational processes which
were envisaged in the policy of poverty alleviation. Amidst disturbing scenes of
increasing deprivation, the question arises: do we need to invest in poverty
programmes anymore?

Against the backdrop of ever-increasing economic disparity and income inequality,

the net impact of poverty alleviation programmes has been equal to naught. In some
instances, the impact of poverty alleviation programmes on the overall economic
health has been negative. Donor-funded poverty alleviation programmes are
politically damaging because they absolve the state of its responsibilities towards its
people. It is the primary responsibility of the state to provide basic services and to
uplift the poor through an inclusive and irreversible socioeconomic graduation
programme. When the state is unwilling to reduce its non-development expenditures,
tax the rich and provide relief to the poor, it is no more an economic issue but a
political question. The state uses donor funds as a political instrument to neutralize the
debate on political and economic reforms.

The Pakistan Poverty Alleviation Fund (PPAF) was established by the government in
1998 as an apex institution for wholesale funding for local partner organizations to
address multidimensional poverty across Pakistan. The World Bank funded poverty
alleviation programme was a soft loan extended to the government of Pakistan under a
contractual obligation with the International Development Assistance (IDA). The
funding was provided in three phases known as PPAF I, II and III from 2000 to 2015
with a combined worth of almost $1 billion as poverty alleviation grants and
microfinance support. The soft loan was extended by the government of Pakistan to
the PPAF as grant to help achieve the government’s commitments to meet the target
of halving poverty by 2015 under the Millennium Development Goals (MDGs).

In addition to the regular funding in the three phases, the World Bank also extended
another soft loan facility of $75 million for social mobilization in 2009. The Social
Mobilization Project was part of the exit strategy which was aimed at investing in
community-based local institutions in 29 poorest districts of Pakistan. These 29
poorest districts were identified in the Mid-Term Development Framework (MTDF)
as key candidates for investing in social mobilization funding.
The PPAF has faced a variety of management issues, lack of quality assurance and
weak monitoring of its development assistance as well as decreasing funding support
to rural support programmes. A detailed critical analysis of PPAF programmes, issues
of management and governance will be discussed in my next article in this series.

From the broader policy perspective, poverty has three key dimensions which affect
the ways the policymakers view poverty alleviation initiatives. The first dimension is
household poverty which can be addressed by devising a locally viable and need-
based supply chain of essential private goods and services at the household level. This
dimension of poverty has been addressed through rural support programmes in
Pakistan and across South Asia.

Household poverty, however, is not only about the provision of consumption-based

goods and services; it is about establishing sustainable and inclusive local institutional
structures governed by the poor. At the household level, the poor need not only a
basket of goods and some tailor-made services but a whole gamut of enabling
structures and venues of income diversification. The provision of subsistence support
will not work well without building the functional capabilities of the poor so that they
can participate meaningfully in economic and political life. The participatory
development paradigm of Rural Development Programmes (RSPs) has worked well as
a universal principle to address the multifaceted household poverty across South Asia.
This needs continuous support from the government so that the participatory
development model is taken to the national scale.

The second dimension of poverty is socio-political, embedded in social and political

structures of exclusion. The impact of development interventions at the household
level will be minuscule without reforming the social and political structures of
inequality and exclusion. In a feudal rural structure like Pakistan, household poverty is
only an offshoot of the political and social system of control and subjugation. The
power relations of subjugation can be reversed through investing in the community
institutions of the poor. The community institutions created through RSPs will wither
away if the government does not invest in them.
The third dimension of poverty is the impact of globalization and neoliberalism
imposed through international financial institutions. If the first and second dimensions
of poverty are addressed, the impact of the third dimension on the poorest segments of
society can be minimized.

Pakistan’s economy needs drastic structural reforms as a prerequisite to attain

sustainable and consistent growth. It needs industrialization, investment in renewable
efficient energy, productive sectors, workforce capacity, science and technology and
rural development programmes. Pakistan must also introduce land reforms,
progressive taxation and economic protectionism to help grow indigenous industry to
reduce reliance on imports. For all of these reforms to take place there has to be a
strong system of political accountability to force the state to prioritize the welfare of
its citizens through equitable allocation of resources.

The launch of the Ehsaasprogramme by Prime Minster Imran Khan is an empathy

move but in practice it will not work unless the burden of economic meltdown is
shifted on to the rich and affluent classes as well as big corporations. Pakistan is one
of the worst ranked countries in the world on the Gini Index – it is one of those
countries that have the highest income disparity between the rich and the poor.
Pakistan has so far availed 13 IMF bailout programmes to finance its non-
development expenditures in 90 percent of cases.

The forthcoming IMF programme will have serious political and economic
implications for the government if timely actions are not taken to reduce the burden
on the poor. The PPAF could not help address multidimensional poverty, and it is
likely that the Ehsaas initiative will not work too. The efficient and effective way for
the government will be to invest directly in rural support programmes rather than
creating an additional institutional layer for poverty alleviation.

The writer is a social development and policy adviser, and a freelance columnist based
in Islamabad.

Email: ahnihal@yahoo.com
Twitter: @AmirHussain76

A roadmap for strong

diplomacy
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International diplomacy is an enduring exercise of doing politics without being

dubbed political about the immediate interests of one’s own country. From an
academic perspective, diplomacy looks more like an abstract idea of international
relations but in practice it is a set of concrete steps, roles and actions enacted through
a formal institutional mechanism. Institutions are rational entities which are designed
to establish universal principles and standards to govern the roles and actions of
individuals.

In the case of international diplomacy, state institutions define the overarching

guiding principles and policy framework for diplomats and statesmen which in turn
defines the fundamentals of diplomatic engagement withthe international community.
That is why a change of governments and their diplomatic functionaries does not
affect the major contours of foreign policy and priorities of international diplomacy of
a state.

The foreign policy framework of a state is founded on institutional priorities which

also reflects the nature of the power structure of a state. The institutions of a
democratic state will define the larger public interest as the primary objective of
international diplomacy, barring global economic empires. For instance, the
Scandinavian states have always pursued an inclusive, welfare-oriented and non-
expansionist international diplomacy for these are the only social democratic states in
the unipolar neo-liberal world. Contrary to this, the US follows a belligerent,
expansionist and exclusionary approach in its global diplomatic engagements. China’s
foreign policy has been driven by an introverted, business-oriented, pragmatic and
nonviolent economic expansion as the key principles to protect and promote the
national interest.
Countries ruled by military dictators have always followed a docile and subservient
international diplomatic approach because they lack political legitimacy in the
international community. Contrary to our perception of strong men, military dictators
usually work as proxies of international powers to prolong their rule, which is why
they position their diplomatic standing as power brokers. That is why undemocratic
countries have always had weak and subservient foreign policies to appease the global
powers which helps consolidate their control over domestic politics. Countries like
Saudi Arabia and Pakistan are examples of following subservient international
diplomacy. In real, a strong state is not one which has strong institutions for the
citizens. 'Strong men' always use international diplomacy for personal aggrandizement
and glorification of the powers that be rather than promoting the public interest.

Diplomacy is not about boasting about what you are good at, it is more about
packaging your weaknesses as potential strengths. Diplomacy is not about hypocrisy,
it is about engaging the world for the benefit of your people who have chosen you to
represent them. Beneath all those big theories of international diplomacy, there lies a
simple cross-cutting fact – all diplomacy is geared to make your political entity
inevitable for others. It is not that easy to assert the position of political inevitability as
a poor nation in the global political community. But good leaders always find strategic
ways to establish the inevitable position in the global system.

Nobody is interested to know how many trees you can plant in your country as a
political leader because it does not make you an inevitable global player, it only
shows you as an introvert nation. It also effects your international political standing
because strategic gains are not output driven. There is a huge difference between
running an output-driven organization and governing a nation of 207 million people.
Even if you are hell-bent to enumerate your internal political achievements on an
international forum then you must not get the facts wrong. Why should I work with
you if you are full of self-propelling propositions? What is my stake and why should I
waste my time pursuing your agenda? This is what happens among all material
relations until they enter into a bizarre spiritual domain. Even those spiritual domains
do not live longer unless they are buttressed by the concrete and material reasons of
affiliation.

When we deal with international relations, diplomacy becomes a means of cementing

together national political priorities and objectives of the foreign policy. A good
foreign policy is always a reflection of national priorities, citizens’ aspirations and the
long-term goal of nation-building in a volatile international environment. On
international policy forums, if a head of government submits to a unilateral diplomatic
narrative he/she tends to lose opportunity to offer a comparative edge to the global
leadership.

For decades, the Pakistani leadership failed to create a positive diplomatic impact on
the thinking of the international community vis-à-vis its key strategic national goals
including the Kashmir dispute, war on terror, international trade and nuclear non-
proliferation etc. One of the most visible diplomatic failures of Pakistan is the
inability of its leadership to make a convincing political case to address the Kashmir
dispute in line with the resolutions of the UN. The failure partly stems from the
confusion and lack of commitment to address the complexity of this dispute to the
satisfaction of its own people.

The protracted conflict between India and Pakistan continues to shape the political,
economic and security paradigm, and a mutually exclusive diplomatic narrative over
the Kashmir dispute. For the Indian federation, the domino effect of losing Kashmir
through a plebiscite may lead to national disintegration in addition to weakening the
political control of the right-wing BJP. For the secular Congress Party, giving away
Kashmir on religious grounds is a challenge for Indian secularism while for the BJP a
burning Kashmir provides political millage by whipping up the anti-Muslim
sentiments of its voters. Whoever comes to power in India as a result of the current
general elections, the Kashmir dispute is not going to find any political breakthrough.
The secular foundations of constitutional democracy in India are under threat with the
rise of Hindutva, which is also reflected in the country's belligerent international
diplomacy towards its neighbours.
Pakistan has not raised the Kashmir dispute on international forums beyond some
sporadic protests and petitions or some diplomatic platitudes in the UN General
Assembly sessions. The plebiscite in Kashmir does not necessarily mean accession to
Pakistan or India as the people of Kashmir can opt for an independent state.

Another question that one may want to ask is: what is the status of Gilgit-Baltistan in
Pakistan as 80 percent people in Gilgit-Baltistan do not consider themselves as part of
the Kashmir dispute? In the wake of the forthcoming CPEC investments, it is vital
that the status of Gilgit-Baltistan is determined either by decoupling the region from
Kashmir or by giving it provisional autonomous status till the resolution of the
Kashmir issue. Both India and Pakistan must come up with a set of options for
resolving the Kashmir issue.

On other diplomatic issues too, Pakistan has not effectively been communicating its
national priorities to the international community perhaps because they have not been
fully defined yet. The constant state of political uncertainty, slow pace and reversals
in the journey of the democratic transition, and continued dependence on international
financial institutions, have multiplied the challenges faced by Pakistan.

The writer is a social development and policy adviser, and a freelance columnist based
in Islamabad.

Email: ahnihal@yahoo.com

Twitter: @AmirHussain76

The myth of competence

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Politics carries a negative connotation for us and yet we love to discuss it because all
of us have some kind of political DNA. If politics is all about negativity, then why do
not we shun it from our drawing room discussions?
The phrase ‘playing politics’ is used to describe the misdeeds of an unscrupulous
character who cheats people for his/her person gains.

One thing is certain about politics: it is about the collective life of human beings as an
expression of solidarity against perceived or real external threats to a group of people.
Politics is mediated through some formal arrangements ie institutions which impose a
set of principles upon its members. Perceived or real external threats help create
solidarity among people and help create institutions for common expression to ward
off the external threat.

From this perspective, we are all political because we will not let it go easily if we feel
threatened. Politics is immersed in our reflexes and therefore the more the fear the
more the politics. But the timid enjoy reading about politics and the brave practise it.
The brave are then curtailed to their size because institutional discipline does not
leave enough space for ramblers and outliers. The brave lose the battle in the world of
organized tyranny if they do not create counter-tyranny – and the conflict goes on.

If the brave submit to the timid, politics takes a negative turn and the timid rule with
guns as the brave sell their wisdom to make a living. Competence is not about what
you know; it is more about what you do not know or how good you are in pretending
that you do not know. No matter what qualification you hold, you cannot be
competent unless you learn the trick to submit.

Politics is institutional, collective and instinctual and it reveals the secret of Homo
sapiens’ tendency to live in groups. Beyond this colloquial use of the term, politics is
all about managing relationships for the larger goal of the collective good. Those who
reach the pinnacle of a system will not enjoy bravery and wisdom. The most
agonizing thing for a brave and thinking individual is to submit to the timid. The
choice is: either you live wisely or enjoy competence. You cannot be both
simultaneously, because wisdom is freedom and competence is slavery. Wisdom
resides in you while competence is defined by others.
If you were Asad Umar, I would not mind terming you a timid competent rather than
a wise incompetent. The irony is that our competent media is hell-bent to prove Asad
Umar as an incompetent man for the job. If politics is the art of managing
relationships for the larger goal of statecraft, then it is better to do politics rather than
pledging competence to the state.

Politics is a process of statecraft which helps diffuse power from a central authority to
the diverse social group through reciprocity and quid pro quo. In a democracy, politics
is governed by the principles of equity, justice, inclusivity and collective expression of
voices, will and aspiration. You may be a well intentioned individual but if you do not
know the art you may end up becoming the instrument of the powers that be.

An honest but incompetent political leadership is worse than a competent but corrupt
leadership – this is the emerging popular narrative in Pakistan. The genesis of this
new popular narrative is linked to the consistent failures of the PTI government to
deliver on its promises. The PTI rose to political prominence as a result of a prolonged
campaign against corruption and incompetence. The top leadership of the PTI, led by
Imran Khan, put forth the political agenda of a new Pakistan whose development
potential, according to the PTI, was hindered by corruption, dishonesty and
incompetence. It was, therefore, inevitable to have an honest, upright and clean leader
at the top slot of government if Pakistan were to become a prosperous and developed
country. Many people in the country saw these qualities in Imran Khan — and for all
the right reasons as he was the only one among many other contenders of the top seat
who was not tainted with corruption at least.

There is no doubt that Imran Khan could establish his personal credentials as someone
who has empathy for the poor people of Pakistan, something reflected through his
charity work. Imran Khan has said time and again in his political speeches that he
ventured into politics because he was impressed by the overwhelming response of the
people of Pakistan during his campaign to establish ShaukatKhanum Memorial
Hospital. To his credit there is also the important personal milestone of being the only
skipper of the Pakistan national cricket team under whose leadership Pakistan could
win the cricket World Cup.

Imran Khan has been able to exploit effectively his individual achievements in his bid
to establish credentials for political leadership and statesmanship. Both his
professional achievements as a cricketer and his altruistic welfare drives were deemed
as the fundamental preserves of an emerging political leader with the ability to
translate vision into action.

However, politics in Pakistan has never been a simple mechanics of building a strong
political constituency as a precondition for electoral victory. Nothing concrete can be
inferred from our chequered political history as an example of when the ideas and
actions of a political leader could bring about real political change. There has always
been a pattern and patchwork of influences, which calls for larger political deals than
the simple democratic processes of transforming popular political ideals into
actionable policies.

In strong democracies, parliament becomes the supreme institution to protect the

interests of citizens, and the source of political power. In weak democracies like
Pakistan, the political choices of citizens do not matter amidst the clash of titans who
hold key to the real power. Parliament must become a place to promote public welfare
and it must be subservient to public interest but in Pakistan it has turned into a
wrestling ring where the fight ends only when one of the fighters surrenders.

The macho-man rule breeds a messianic view of politics which has always been the
hallmark of Pakistani politics under military dictators. It is instructive that Imran
Khan and his PTI leadership must learn the art of politics and devote their energies to
statecraft rather than fighting petty media wars.

What is incompetence? It is the lack of the required capacity and skills to perform the
task for which a person is chosen in a system. Incompetence is not purely an
individual’s trait; it is also about the factors built into a system which govern the rules
of business. An honest, committed and upright person may have good intentions to
play his/her role fairly but that is not the only condition for a system to function. If
you are brave and wise, you may not be competent and if you are competent you may
not be wise and brave.

Thus the competence argument does not hold much water in real politik; rather, it is
all about your ability or inability of playing to the gallery.