LAHORE—Pakistan’s economy has been significantly impacted by the cigarette industry’s dominance, high consumption rates, and resultant health costs.
The International Monetary Fund (IMF) has recommended uniform taxation on the tobacco sector to address these challenges. The IMF’s report emphasizes the need to generate maximum revenue from the industry while addressing health concerns.
The IMF’s recommendation comes on the heels of a substantial decline in cigarette consumption by 20-25 per cent following an increase in taxes on tobacco products. It also advocates for subjecting e-cigarettes to similar taxation as traditional tobacco products, citing comparable health impacts. Health activists and the Sustainable Development Policy Institute (SDPI) have also called for restructuring tobacco taxation in Pakistan.
SDPI’s report, based on FBR data, highlights discrepancies in the tax collection framework. Pakistan has lost revenue of Rs 567 billion in the past seven years. The former federal Minister for National Health Services, Dr Nadeem Jan, has demanded a 50 percent tax increase on tobacco products to deter consumption, especially among youth.
His demand is based on Article 6 of the WHO Framework Convention on Tobacco Control. Pakistan’s commitment to the Framework Convention on Tobacco Control (FCTC) underscores the importance of a unified cigarette pricing system to regulate the industry effectively and discourage consumption.
The World Health Organization (WHO) advocates for robust tax measures to reduce tobacco consumption, citing the effectiveness of a 10% increase in tobacco prices typically leading to a 4% decrease in overall tobacco consumption in high-income countries and up to an 8% decrease in low- and middle-income countries.
A study by the Pakistan Institute of Development Economics (PIDE) highlights the dire consequences of smoking-related diseases and deaths, with costs amounting to Rs 615.07 billion ($3.85 billion) in 2019, equivalent to 1.6% of the GDP.
The Pakistani government’s recent decision to increase the Federal Excise Duty (FED) on cigarettes has resulted in both revenue gains and a reduction in the rate of smoking. A World Bank report suggests that applying the current tax rate on premium cigarettes to standard cigarettes could further enhance revenue generation. Malik Imran Ahmed,
The Country Head of the Campaign for Tobacco-Free Kids (CTFK) urges policymakers to implement comprehensive tax reforms to safeguard public health and bolster fiscal stability. The IMF has referred to a study by Capital Calling, an Islamabad-based think tank that finalized recommendations for tax reforms.
