Islamabad, (Parliament Times) : An urgent increase in the Federal Excise Duty (FED) on cigarettes is essential to curb tobacco consumption, reduce smoking-related healthcare costs, and generate additional government revenue. With over 31.6 million adult tobacco users in Pakistan, the country is grappling with a severe public health crisis. Tobacco consumption claims more than 163,000 lives annually, placing an overwhelming burden on the healthcare system and costing the economy at least 1.4% of its GDP.
Society for Alternative Media and Research (SAMAR), a leading anti-tobacco advocate working on tobacco control in Pakistan for the past two decades, stresses the need for immediate fiscal measures. Pakistan’s previous tax reforms in 2022-23 significantly increased FED rates, resulting in a notable decline in cigarette consumption while simultaneously boosting revenue. However, the lack of further tax adjustments in 2023-24 has stalled this progress, posing risks to both public health gains and revenue growth. To sustain momentum, SAMAR strongly recommends a 40% increase in the FED rate in the upcoming Budget. This measure is projected to reduce the number of smokers, generate substantial tax revenue, and recover a significant portion of smoking-related healthcare costs, stated Ashfaq Ahmad, Communication Officer at SAMAR.
The success of the 2022-23 tax reforms underscores the effectiveness of higher FED rates in achieving both public health and economic objectives. Between July 2023 and January 2024, tobacco tax revenue reached PKR 122 billion, with full-year projections exceeding PKR 200 billion. Additionally, increased FED rates contributed an estimated PKR 60 billion in additional General Sales Tax (GST) revenue from cigarettes. These figures highlight the dual benefit of tobacco taxation: discouraging smoking while bolstering government finances.
Concerns over potential illicit trade due to higher taxation have been refuted by research, which indicates that tobacco companies manipulate production figures to influence tax policies. Furthermore, the implementation of the track-and-trace system is expected to play a crucial role in curbing illicit trade, preventing tax evasion, and ensuring compliance within the tobacco industry.
Beyond immediate tax adjustments, SAMAR urges the government to adopt long-term policy measures that integrate healthcare cost recovery into tobacco taxation. This includes: 1. Implementing automatic tax adjustments that align with the total healthcare costs attributable to smoking. 2. Introducing a uniform FED rate across all cigarette brands to eliminate disparities in taxation. 3.Committing to progressive tax increases over the next five years to further reduce tobacco consumption.
The call for a tobacco tax increase is not just about revenue—it is a necessary step to protect public health, save lives, and ease the financial strain on Pakistan’s healthcare system. SAMAR emphasizes that now is the time for decisive action. The government must prioritize public welfare by ensuring a significant hike in tobacco taxes in the upcoming Budget, paving the way for a healthier and economically stronger Pakistan.