Calls for higher tobacco taxes gain momentum

The consumption of cigarettes in Pakistan has witnessed a decline following a significant increase in taxes on tobacco products

Calls for higher tobacco taxes gain momentum


ealth experts and policymakers are rallying behind the demand for raising taxes on tobacco products, citing the urgent need to curb smoking and mitigate associated health risks.

This support suggests a shifting landscape in tobacco regulation, with mounting pressure to implement measures that could have far-reaching impacts on public health and government revenue.

Speakers at a recent seminar highlighted the positive impact of increase in tobacco taxation and its effects on health costs to demand the government an increase the federal excise duty on tobacco products in 2024.

Mehboob-ul Haq, the Human Development Foundation CEO, said that pervasive tobacco consumption remained a formidable challenge for Pakistan, imposing a grave toll on both public health and the economy.

He said that 31.9 million adults, roughly 19.7 percent of the adult population, use tobacco resulting in a significant health crisis.

According to a study by the Pakistan Institute of Development Economics, costs linked to diseases and deaths resulting from smoking in 2019 reached a staggering Rs 615.07 billion ($3.85 billion), equivalent to 1.6 percent of the GDP.

According to an estimate, the country produces more than 60 billion sticks of cigarettes every year. When it comes to revenue, the Federal Board of Revenue data shows that tax collection targets were missed during the last seven years.

The loss, estimated by a number of research studies, including one by the SDPI, during the last seven years has been estimated at Rs 567 billion.

The World Health Organisation has emphasised the need to safeguard tobacco tax policies from vested interests of cigarette companies for effective development, implementation and enforcement of public health initiatives.

The International Monetary Fund recently recommended that the government raise the taxes on tobacco. It also advocated imposition of uniform excise rates on both local and foreign cigarette manufacturers.

At present, Pakistan has a two-tier tax structure. International guidelines propose a uniform tax system. The IMF has also called upon the authorities to tax e-cigarettes to curb their growing use and impact on public health.

The IMF gave its recommendations following a revelation that the consumption of cigarettes in Pakistan has witnessed a decline of 20-25 percent following a significant increase in prices and taxes on tobacco products.

Health activists and experts have rallied behind the IMF’s stance, emphasising the need for restructuring tobacco taxation in Pakistan.

Zahid Shafiq, programme manager at the HDF, says that the hike in FED rates last year took place after three years and has yielded tangible benefits.

By 2022-23, the FED share in retail prices had reached 48 percent and 68 percent for low and high-tier cigarettes, respectively. However, the momentum slowed down in 2023-24, underlining the urgent need for sustained efforts in tobacco taxation to safeguard public health and fiscal prosperity, he says.

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

Malik Imran, the CFTK country director says that the tax hike can generate an additional Rs 17 billion revenue, comprising Rs 15.4 billion in FED and Rs 1.6 billion in GST, marking a 12.1 percent increase.

Former minister Dr Nadeem Jan has advocated for a 50 percent tax increase on tobacco products to deter consumption, especially among youth, citing severe health concerns.

Pakistan’s commitment to the Framework Convention on Tobacco Control underscores the importance of a unified pricing system for cigarettes to regulate the industry effectively and discourage consumption.

It is unfortunate that two decades after the FCTC, the cigarette industry can still influence decision making.

A World Bank report titled Pakistan: Overview of Tobacco Use, Tobacco Control Legislation, and Taxation has said that the decline in government revenue in the 2016-2017 fiscal year was planned by the cigarette industry.

The writer is a journalist based in Islamabad

Calls for higher tobacco taxes gain momentum