Pakistan's Tobacco Tax Hike Reduces Cigarette Consumption

In a significant development, Pakistan has experienced a notable decline in cigarette consumption following the government's decision to raise taxes on tobacco products. A recent study conducted by Capital Calling, a network of researchers and professionals, revealed that one in every 94 smokers has quit smoking in response to the price hike. This move by the government was aimed at addressing both public health concerns and revenue deficits.

The Federal Board of Revenue (FBR) implemented a substantial increase in taxes on tier-1 cigarettes, raising the duty from 130 rupees to 330 rupees, marking a 154 percent net increase. The decision is expected to boost revenue from Rs 148 billion to Rs 200 billion in the current fiscal year. The survey conducted in major cities like Islamabad, Rawalpindi, Lahore, and Peshawar highlighted that smokers found it financially challenging to continue purchasing cigarettes, leading them to prioritize essential needs such as food and education.

The survey findings underscored the detrimental impact of the tobacco industry, estimating an annual loss of 620 billion rupees due to diseases like cancer, chronic respiratory illnesses, and cardiovascular diseases, resulting in 337,500 deaths annually. Additionally, Pakistan suffered a loss of 567 billion rupees in potential revenue over the past seven years due to lobbying efforts by cigarette companies for lower taxes.

Despite concerns raised by multinational tobacco companies about the prevalence of illegal cigarettes in the market, on-the-ground surveys revealed that the actual share of illicit products was around 18 percent, including brands from the same companies expressing worry. The evidence suggests that further increases in Federal Excise Duty (FED) on the tobacco sector could lead to a continued decrease in cigarette sales across Pakistan in the upcoming months.