The average excise tax share on cigarettes in Pakistan is 45.4% of the retail price, much lower than the WHO minimum recommended rate of 70%.
Increasing the tax rate will improve health outcomes by reducing cigarette consumption and generate additional revenues for the government.
This is stated in a policy note released by the Social Policy and Development Centre (SPDC).The policy note entitled “Modelling the Revenue and Health Implications of Tobacco Tax Policy in Pakistan: Options for the Federal Budget 2021-22” portrays a grave situation of tobacco use in Pakistan. With a prevalence rate of 19.1%, about 30 million adults (age 15 +) currently use tobacco in the country.
Tobacco use is the leading cause of deaths due to non-communicable diseases (NCDs), killing an estimated over 160,000 people each year.
Tobacco taxation is used as a policy instrument for tobacco control in Pakistan, serving a dual objective of public health promotion and revenue generation.
However, the current level of the effective excise tax rate on cigarettes is still the same as five years ago in 2016-17.
Therefore, cigarettes in Pakistan have become more affordable as the cigarette prices in Pakistan are lowest among the regional countries, including India, Bangladesh, Sri Lanka, Nepal and Iran.
The in-depth analysis in the report shows that raising the excise tax rate even by only 30% would result in 219,000 fewer smokers, a 3.8% reduction in smoking prevalence among adults,and the prevention of 424,000 smoking-attributable deaths,including 348,000 future young smokers. On the revenue side, it will generate additional revenue of Rs19 billion – an increase of 14.4% over the base year collection.