Pakistan's military government is under attack from consumer groups, political parties and industry organisations alike for its recent decision to impose a 15 percent general sales tax (GST) on all medicines.

The decision to impose the tax, announced on Mar 21, comes as Islamabad is under pressure to raise funds given its shortfall in meeting irevenue targets — it has already cut its pledged revenue target to the International Monetary Fund (IMF) thrice.

The GST move, which comes four months after an increase in drug prices, is expected to generate four billion rupees (US$66.7 million) in revenues.

As he announced the tax, Central Board of Revenues head Riaz Malik said the move is not an "immediate decision", since consultations between the government departments and the Fund have been continuing for almost year and a half.

The Fund is also pushing Pakistan to withdraw tax exemptions on edible oil, agricultural implements and information technology.

But last week's decision has triggered a barrage of protests from divergent groups. They say that the new tax will see the prices of drugs soaring, making them even more inaccessible in Pakistan, some 50 million of whose 135 million people live below the poverty line.

"The decision is grossly unjust, exploitative and inequitable," the Islamabad-based The Network for Consumer for Protection said in a statement. "With already high drug prices, the GST would serve as the last nail in the coffins of the sick and the poor."

Consumer groups are, however, not alone this time. The pharmaceutical industry, doctors and pharmacists' organisations are also opposing the decision through big newspaper advertisement and appeals to the government for its reversal.

"One of the present government's primary objective is to alleviate increasing levels of poverty. This noble objective will be seriously undermined if GST is imposed on medicines," read a newspaper appeal by the Pakistan Pharmaceutical Manufacturing Association, a group of local pharmaceutical companies.

The advertisement was co-sponsored by the Pakistan Medical Association, the Pakistan Pharmacist Association and the Pakistan Chemist and Druggist Association.

According to the government's estimates, the new tax will raise medicine prices by 10 to 12 percent. Critics say the overall hike will be much higher.

Misleading claim

"This claim is misleading especially against the backdrop of up to 40 percent rise in the drug prices as a result of three to four percent increase arbitrarily granted by the government in November last year in the absence of a rational drug-pricing policy," said Azhar Hussain, a pharmacist by profession.

According to activists, as many as 50 percent of people do not have access to essential medicines in Pakistan. The prices of most of the commonly used medicines are already higher in Pakistan compared to other countries in the region.

"The government must review this decision as it will aggravate the problems of the common man. We never supported the government on the issue of GST on medicines," said Mushtaq Noorwala, vice chair of the Federation of Pakistan Chambers of Commerce and Industry.

However, the industry groups' concern is based more on the impact the tax will have on the local manufacturing of medicines. "GST on medicines will kill the bulk drug industry, which is in its infancy in Pakistan,'' said a statement by the federation.

''It needs proper incentives like in China and India in order to promote indigenisation, self-sufficiency, foreign exchange savings, pharmaceutical exports and stabilisation of drug prices in the country," the group said.

But multinational pharmaceutical companies back the GST decision and have assured the government that they will absorb part of the impact on consumers' behalf.

Meantime, Pakistan's financial and health managers are trying their best to make the GST tax look like a decision taken to improve the health sector, which is in a shambles.

According to the Director General of Health, retired Maj Gen Mohammad Aslam, would use the additional revenue from the GST on medicines for public expenditure on health in next year's budget.

Pakistan spends 0.7 percent of GDP on the health sector, the lowest in the region. Due to low spending, the public health delivery system suffers from inefficiencies, lack of medical and paramedical staff, inadequate equipment and overall below-the-mark services.

Cruel joke

However, critics ridiculed the government's vision of GST-pumped health sector improvement and called it an eyewash.

"Although coated by a fine layer of 'public health care' sweetener, the plan remains a bitter financial pill that the people will have to swallow only to help the government meet the shortfall in its revenue collection targets,'' said the English-language daily The News last week, just one of virtually all local and English papers to criticised the GST decision.

''The decision seems to have been taken out of financial compulsion after 'consultations' with the IMFthan the one based on the people's health needs," it added in an editorial.

In a country where consensus on issues is hard to get, there is complete unanimity on this issue.

Even political parties like Pakistan Muslim League and the Pakistan People's Party demanded for the withdrawal of the new levy, calling it a "cruel joke" on the people. They also ridiculed the government plan of what they called "forcible taking from the sick and the poor" to re-invest in the health sector.

Indeed, this controversy may well be a test for the military government, which does not tire of claiming that it takes decisions on the basis of popular public opinion.

"Since there is a broad consensus that the GST on medicines should be withdrawn, it remains to be seen who wins this time — the IMF or the people of Pakistan," said a member of the Pakistan Chemist and Druggist Association. (IPS)