Pakistan Tobacco Tax Challenges and its impact on our Health System
As the budget season approaches in Pakistan, it presents an important opportunity to enhance health and economic conditions through tobacco taxation.
The high consumption of tobacco impacts the nation in many adverse ways, causing a total of 192,000 deaths and costing about Rs 1,835 billion in public health expenditure. On the other hand, revenue from tobacco taxes does not even cover a fraction of the health costs. This highlights that tobacco consumption creates a net economic burden, affecting both public health outcomes and economic productivity.
One of the key challenges is affordability. Cigarettes are easily available and cheap to purchase in Pakistan. Moreover, taxes have been losing their real value over time, with an almost 20% reduction in effective tax rates being observed in recent years. This affordability particularly affects young people. Lower prices make it easier for youth to purchase tobacco products and initiate smoking at an early age. Evidence from Pakistan’s 2022–23 tobacco tax increase also suggests that young people are more likely to reduce cigarette consumption when prices rise, highlighting the importance of taxation as a tool for preventing tobacco use among youth.
Structural weaknesses in the tax system make the situation even more challenging. A large disparity between taxes levied on premium and economy cigarettes makes it more likely for consumers to switch to cheaper products. Such a pattern can be observed easily through the increased prevalence of economy cigarettes in the market, thus undermining the primary objective of tobacco taxation: reducing tobacco consumption.
The WHO Framework Convention on Tobacco Control (FCTC) also indicates a clear way forward. According to the MPOWER strategy developed by the World Health Organisation, raising taxes on tobacco products is one of the most effective means of reducing tobacco consumption. Furthermore, Article 6 of FCTC also emphasises the importance of price and tax measures in tobacco control. Other policy interventions, such as smoke-free public places, graphical health warnings, and restrictions on tobacco advertising become even more effective when supported by higher tobacco pricing.
There is considerable room to improve the effectiveness of tobacco taxation in Pakistan. The latest assessment of tobacco taxes by SPDC recommends an increase in the Federal Excise Duty of Rs 35 per pack for economy-class cigarettes and Rs 21 per pack for premium-class cigarettes. This will not only make tobacco taxation more effective, but it can also reduce the number of smokers by 271,000, prevent around 369,000 young people from taking up smoking, and generate an additional Rs 51 billion in government revenue.
A recent example comes from Brazil, where the government moved to strengthen tobacco taxation while responding to broader fiscal pressures and concerns related to rising fuel costs. Pakistan faces similar fiscal pressure as policymakers prepare the upcoming budget and consider measures to manage revenue needs and broader economic challenges especially the rising fuel costs due to the regional situation. The case serves as a practical example for Pakistan on how tobacco taxes can simultaneously improve public health outcomes and contribute to government revenue.
Tobacco taxation presents an opportunity to improve public health while strengthening government finances. A steady and consistent increase in tobacco taxes would make cigarettes less affordable, while adjustments for inflation would ensure that the impact of taxation remains effective over time. Moreover, simplifying the tax structure would reduce opportunities for consumers to switch to cheaper products. For young people, this is not merely a fiscal decision; it is a policy choice that will shape the health of future generations. The message is simple: prioritise public health over tobacco industry interests and adopt stronger tobacco taxation measures in the upcoming budget.
The views expressed in this article are solely those of the author and do not necessarily reflect the views of The Opinion Desk.
