ISLAMABAD -Several speakers at a seminar have emphasized the need for an increase in tobacco taxation to mitigate the pervasive health hazards associated with tobacco.
They highlighted the impact of the rise in tobacco taxation and its effect on health costs, economic, and social factors. They have demanded an increase in the Federal Excise Duty (FED) on tobacco products in 2024 to address the challenge of tobacco consumption in Pakistan, which is imposing a grave toll on both public health and the economy.
Speaking on this occasion, Mehboob Ul Haq, CEO of the Human Development Foundation (HDF), said that with 31.9 million adults currently using tobacco in Pakistan, roughly 19.7% of the adult population, the nation faces a significant health crisis. Therefore, in tandem with efforts to address tobacco consumption, recommendations from the International Monetary Fund (IMF) underscore the importance of rationalizing excise duties in Pakistan by streamlining the excise structure and focusing on goods with significant negative externalities to enhance public health outcomes and revenue generation.
The key aspects the IMF emphasizes are aligning taxation policies with the quantified level of externalities and prioritizing luxury goods for excise duty increases. Moreover, the IMF highlights the necessity of taxing e-cigarettes and novel products, similar 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), calls attention to the fact 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, gradually implementing a uniform FED rate across all cigarette brands fosters fair competition and prevents market distortions.
