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Increased Tax On Nutritious Dairy Products Will Lead to Inflation, Cause Malnutrition

Press Release

The government of Pakistan has proposed in the Finance Bill an increase in the General Sales Tax rate from 10% to 17% on dairy powders, yogurt, cheese, butter, milk cream, tea whitener, and flavored milk. Contrary to the pre-budget discussions with the Pakistan Dairy Association, this proposed sales tax increase will result in an additional payment of Rs 5 billion by the large end user – negatively impacting nutritional levels. 

The Pakistan Dairy Association has described the increase in tax rate as “fueling inflation and taxing the health of the nation” which is as truthful as it can be because it makes us question whatever happened to Prime Minister Imran Khan’s commitment. 

Fortified products provide affordable nutrition to a significant sector of the population but taxing these dairy products heavily will mean that people would struggle more to earn their bread and butter and put nutritious meals on their tables. Burdening an already limited pocket with high taxation – what does this say about the government’s initiative of providing proper nutrition to its citizens? How does the government aim to protect its masses from rising cases of malnutrition following this increase? Increasing sales tax is only going to make matters worse for the dairy sector.

A tax policy should provide a level playing field to all players, be consistent over the long run and promote broader public policy objectives. The present tax regime does not reflect the principles of providing an equal playing field to all players. Instead, it seems to skip the health sector as an important player in the priority list when it comes to devising policies. 

The dairy sector plays an important role in strengthening the national economy therefore the government should consider the requests of the dairy association with an open mind and put forth a decision that is in favor of the economy and the well-being of the people.

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