IN Pakistan, where nearly 20% of adults are tobacco users, the toll of smoking extends far beyond individual health consequences. With over 160,000 deaths annually attributed to tobacco-related illnesses, the economic burden on the nation is staggering, equivalent to 1.4% of GDP each year. As the country grapples with rising prices of daily essentials, particularly during the Holy Month of Ramadan, it’s time to reassess our approach to taxation, particularly on tobacco products, as a means of not only generating revenue but also safeguarding public health.
The current scenario is grim: despite the substantial taxes imposed on cigarettes, the revenue generated falls short of covering the healthcare costs incurred due to smoking-related illnesses. Shockingly, in the fiscal year 2022-23, cigarette taxes only covered 16% of these expenses, a decline from 19.5% in 2019. Early indications for 2023-24 are even more alarming, suggesting that the revenue might not surpass 19% of healthcare costs. This disconcerting trend demands immediate action.
Pakistan’s tobacco taxation system operates on a two-tiered Federal Excise Duty (FED) structure, which categorizes cigarettes based on price tiers. While there was a significant increase in FED rates in 2022-23, subsequent stagnation in 2023-24 poses risks to both revenue and public health initiatives. However, there’s a glimmer of hope in the proposed 26.6% FED increase for 2024, which could potentially recoup nearly 20% of healthcare costs and deter over half a million individuals from smoking.
Beyond the immediate fiscal year, the government must adopt a proactive stance towards tobacco taxation. Automatic adjustments tied to healthcare costs, a uniform FED rate across all cigarette brands and a structured plan for tax increases over the next few years are essential steps. Such measures not only ensure a steady revenue stream but also serve as powerful deterrents against tobacco consumption, thereby saving lives and reducing healthcare expenditures in the long run.
Critics may argue that raising tobacco taxes disproportionately affects low-income individuals, especially during times of economic hardship. However, evidence suggests that the health and economic benefits far outweigh the short-term challenges. Research indicates that for every 10% increase in cigarette prices, consumption decreases by about 4%, particularly among vulnerable populations like youth and low-income earners. Moreover, the revenue generated from tobacco taxes can be redirected towards healthcare and social welfare programs, benefiting those most in need.
In a country where millions struggle to make ends meet, prioritizing tobacco taxation isn’t just a pragmatic economic decision; it’s a moral imperative. By curbing tobacco consumption, we not only alleviate the burden on our healthcare system but also improve the overall well-being of our citizens. As we navigate through challenging times, let us seize the opportunity to reshape our policies in ways that benefit both our economy and public health. It’s time to reimagine tobacco taxation in Pakistan, not just as a revenue generator, but as a catalyst for positive change.
—The writer is Programme Manager, Society for the Protection of the Rights of the Child, SPARC, Islamabad.
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