ISLAMABAD – High tobacco taxation serves as a vital measure in combating tobacco consumption, as was advocated by the World Health Organization (WHO), says survey findings by the Center for Research and Dialogue (CRD), a Pakistan-based think tank.
A recent survey in Pakistan found that a significant increase in cigarette prices caused 18% of people to quit smoking. Maryam Gul Tahir, the Director of CRD, stated that the survey results demonstrate that tax hikes are beneficial for both public health and government revenue.
In the past, the tobacco industry had a significant influence in Pakistan, particularly through multinational corporations. However, recent policy decisions suggest a shift in prioritizing public health over industry interests.
The government increased Federal Excise Duty (FED) rates after years of stagnation. This policy shift not only protects public health but also serves as a fiscal measure to alleviate the economic burden associated with smoking-related healthcare costs.
In February 2023, the Finance (Supplementary) Act saw FED rates increase by 146% for economy brands and 154% for premium brands. This drastic change marked a significant departure from previous policies. This strategic decision has already demonstrated tangible outcomes, with cigarette consumption showing a marked decline.
The International Monetary Fund (IMF) recognized this positive trend, noting a 20-25% reduction in cigarette consumption following the tax hike. The survey findings indicate a decline in overall consumption and a shift in smokers’ behaviour. About 15% of respondents reported reducing their cigarette intake due to the increased prices.
This collective response has contributed to an estimated reduction of over 11 billion cigarette sticks in consumption. The total consumption of cigarettes in Pakistan ranges from 72 to 80 billion sticks annually, inclusive of various sources such as officially produced, smuggled, and untaxed products. Maryam urged the government to continue the policy of increasing cigarette prices to sustain the decline in consumption.
She said that Pakistan still lags behind other countries in the region and the world as cigarette prices are still lower than in other countries. The call for intensified taxation aligns with international guidelines, notably the World Health Organization Framework Convention on Tobacco Control (WHO FCTC), which emphasizes the correlation between increased prices and reduced consumption.
The IMF has advocated for a uniform taxation structure on tobacco products to further reduce consumption and increase government revenue. Similarly, the World Bank pointed out that applying the current rate on premium cigarettes (Rs. 16.50 per cigarette) to standard cigarettes could achieve a significant revenue gain of 0.4% of GDP (PKR 126 billion).
