The urgency of raising tobacco taxes

High taxes result in higher prices and are a disincentive for many tobacco users, particularly in price-sensitive populations

The urgency of raising tobacco taxes


obacco taxation is a critical tool in the hands of policymakers aimed at safeguarding public health, generating revenue and reducing tobacco consumption. In a revenue-starved country like Pakistan, the urgency to raise taxes on tobacco products is evident.

Article 6 of the Framework Convention on Tobacco Control calls for raising taxes on tobacco products to more than 70 percent and ensuring that these are reflected in the retail prices. Depending upon the influence of the tobacco industry, widely varying taxation systems and tax brackets are followed across the world.

In some countries, taxes remain are low. In others, high taxes and prices have discouraged tobacco consumption and improved public health.

One of the most interesting examples of tobacco taxation is Australia, where, depending upon the Average Weekly Ordinary Time Earnings, tobacco taxes are raised twice a year (in March and September). Excise and equivalent customs duties are also raised by an additional 5 percent per year. Australia has one of the highest tobacco sales prices so that a pack of 20 cigarettes can cost up to AU$ 45 (more than Rs 8,000).

Pakistan has some of the lowest tobacco product prices in the world. It has been a signatory to the FCTC since 2005 but its tobacco users continue to burden the healthcare system.

Besides Australia, Pakistan can follow the example of countries such as France, the UK, Ireland and New Zealand. These and many other countries have imposed higher than 70 percent taxes on tobacco products. At the behest of the IMF, Pakistan raised tobacco taxes in February 2023.

Before every budget, there is a lot of advocacy by the tobacco industry to prevent a raise in tax rates. Two narratives are being pushed by the tobacco industry this year: the futility of the tax stamp/track and trace system and efforts to seek permission for 10 cigarette packs.

In the former case, a narrative has been developed by the industry that the imposition of the track and trace system (in July 2022) resulted in less cigarettes being sold and therefore lower tax revenue for the state.

However, our research shows that the total crop tonnage averaged almost the same as the previous year. Tobacco buyers are obliged to buy every last straw of tobacco produced by the farmers every year. The purchase of the same quantities by the tobacco industry means the production of almost the same number of cigarette sticks (nearly 59 billion). Consequently, the FBR can expect and demand the same or more tax revenue this year.

The second narrative concerns the production and export of 10-cigarette packs. Smaller pack cost less and can promote smoking. Therefore, all jurisdictions are advised not to allow sale of packs containing less than 20 cigarettes.

Articles 5.3, 6, 9 and 10 imply this. Article 16 of the framework explicitly prohibits the sale of cigarettes in less than 20 per pack. Efforts by the tobacco industry to seek permission to manufacture smaller packs could open a Pandora’s box in terms of global treaty obligations.

Both these narratives are efforts to offset the taxes, resulting in reduced revenue, efforts to discontinue the Track and Trace System, the perpetuation of smoking and nicotine addiction and secure profits. The global best practices favour high, uniform rates of taxes. High taxes result in higher prices and are a disincentive for many tobacco users, particularly in price-sensitive populations such as youth and low-income individuals.

The government needs to conduct a comprehensive assessment of the current tobacco tax structure and heed the IMF recommendation for imposing higher taxes on luxury items, such as tobacco. A roadmap needs to be developed in the light of the recommendations made by the ministry of health and tobacco control advocates, for achieving more than 70 percent taxes on tobacco products. Any effort by the tobacco industry to flout the regulations will directly impact public health outcomes.

The writers are tobacco control advocates working at the Sustainable Development Policy Institute, Islamabad.

The urgency of raising tobacco taxes