Call for tobacco tax hike in 2024 in Pakistan

Islamanad: Speakers at a seminar highlighted the impact of increase on tobacco taxation and its effect on health cost, economic and social factors and demanded increase the Federal Excise Duty (FED) on tobacco products in 2024 to mitigate the pervasive health hazards associated with tobacco.

Speaking on this occasion, Mehboob Ul Haq, CEO Human Development Foundation (HDF) said that tobacco consumption remains a formidable challenge for Pakistan, imposing a grave toll on both public health and the economy. With 31.9 million adults, roughly 19.7% of the adult population, currently using tobacco, the nation faces a significant health crisis. Alarmingly, tobacco-related illnesses claim over 160,000 lives annually, representing a staggering 1.4% of Pakistan's GDP lost to smoking-related healthcare costs each year.

In tandem with efforts to address tobacco consumption, recommendations from the International Monetary Fund (IMF) underscore the importance of rationalizing excise duties in Pakistan. Streamlining the excise structure and focusing on goods with significant negative externalities could enhance both public health outcomes and revenue generation. Aligning taxation policies with the quantified level of externalities and prioritising luxury goods for excise duty increases are key aspects emphasized by the IMF. Moreover, the IMF highlights the necessity of taxing e-cigarettes& novel products, similarly to tobacco products, given their equivalent impact on public health.

Zahid Shafiq (Programme Manager -HDF) stated that the previous hike in FED, observed after a three-year hiatus, yielded tangible benefits. By 2022-23, the FED share in retail prices reached 48% and 68% for low and high-tier cigarettes, respectively. However, momentum slowed in 2023-24, underlining the urgent need for sustained efforts in tobacco taxation to safeguard public health and fiscal prosperity.

Crucially, the proposed 26.6% FED increase in 2024 presents a triple-win scenario. It is projected to deter approximately 517,000 individuals from smoking, thereby reducing cigarette consumption by 5.8% and adult smoking prevalence by 0.31%. Moreover, this measure is anticipated to save 181,000 adult lives, underscoring its life-saving potential.

Malik Imran, country director (CTFK) call attention to that economically, the tax hike is poised to generate an additional revenue of Rs17 billion, comprising Rs15.4 billion in FED and Rs1.6 billion in GST, marking a 12.1% increase. Such revenue augmentation is critical for funding essential public services and healthcare initiatives. Additionally, gradual implementation of a uniform FED rate across all cigarette brands fosters fair competition and prevents market distortions.