ISLAMABAD – The Pakistani government has raised the Federal Excise Duty (FED) on cigarettes, leading to a notable increase in revenue while reducing cigarette consumption.
The Federal Board of Revenue (FBR) Yearbook 2022-23 has confirmed that the share of cigarettes in the overall FED collection has now risen to 40 percent.
The report also states that the top ten sectors account for around 94 percent of the collection, with cigarettes standing at the top, followed by cement and concentrate. This increase is mainly due to the imposition of higher FED rates on cigarettes, which saw three significant upward revisions in the fiscal year 2022-23, ending a three-year stagnation period.
The FBR Yearbook highlights that one of the major contributors to FED revenues was the cigarette sector, due to both inflation and the increase in excise duty rates. As cigarette consumption diminishes, the consequential reduction in health-related issues could positively impact healthcare expenditures, contributing to a healthier and more sustainable society.
The reduction in tobacco usage also aligns with the broader public health objective. According to a study by the Pakistan Institute of Development Economics (PIDE), the 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.
Malik Imran Ahmed, Country Director of Campaign for Tobacco-Free Kids (CTFK), commented on the development, stating that the tobacco industry had expressed discontent over the increase of FED, claiming it would result in the shutdown. However, the FBR’s data has challenged the industry’s assertion, showing a significant 40 percent share of the FED.
Independent experts have emphatically called upon the FBR to implement the World Bank’s recommendation advising an increase in FED on cigarettes, as mentioned in a recent report, Pakistan Development Update (PDU).
The report suggests that a substantial revenue gain of 0.4 percent of GDP could be achieved if the current rate on premium cigarettes (PKR 16.50 per cigarette) was also applied to standard cigarettes.
The WHO Framework Convention on Tobacco Control (FCTC) guidelines also emphasise taxation’s pivotal role as a primary tool in mitigating tobacco consumption.
