SPDC suggests hike in tobacco tax for Budget 2021-22

KARACHI: The Social Policy and Development Centre (SPDC) in a note has suggested increasing the tax rate on cigarettes in Pakistan, which was only 45.4 percent of the retail price, much lower than the WHO minimum recommended rate of 70 percent.

“Increasing the tax rate would improve health outcomes by reducing cigarette consumption and generating additional revenues for the government,” it said in the policy note entitled “Modelling the Revenue and Health Implications of Tobacco Tax Policy in Pakistan: Options for the Federal Budget 2021-22”.

The in-depth analysis shows that raising the excise tax rate even by only 30 percent would result in 219,000 fewer smokers, a 3.8 percent reduction in smoking prevalence among adults, and the prevention of 424,000 smoking-attributable deaths, including 348,000 future young smokers. On the revenue side, it will generate additional revenue of Rs19 billion – an increase of 14.4 percent over the base year collection.

With a prevalence rate of 19.1 percent, about 30 million adults (age 15+) currently use tobacco in the country. Tobacco use is the leading cause of deaths due to non-communicable diseases (NCDs), killing an estimated over 160,000 people each year.

Tobacco taxation is used as a policy instrument for tobacco control in Pakistan, serving a dual objective of public health promotion and revenue generation. However, the current level of the effective excise tax rate on cigarettes is still the same as five years ago in 2016-17.

“Therefore, cigarettes in Pakistan have become more affordable as the cigarette prices in Pakistan are lowest among the regional countries, including India, Bangladesh, Sri Lanka, Nepal and Iran,” said the policy note.

SPDC’s proposed tobacco tax reform would greatly help the government of Pakistan achieve its commitment to reduce tobacco use and reduce deaths from NCDs as per its pledge to achieve the SDG-16 and align its tobacco tax policy with global best practices.