Increasing Taxes on Cigarettes, most cost-effective way of reducing tobacco consumption


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Approval of S.R.O.178(1)/2023 aimed to increase excise tax on cigarettes is a highly commendablemove by the govt of Pakistan. Federal Board of Revenue (FBR) has taken ahistoric step to protect public health.

The move will further strengthen sustainable economic growth. But there is room available to increasefurther taxes on cigarettes, helping a great deal in reducing the affordabilityof cigarettes, especially among youth.

The demand for tobacco isstrongly influenced by its price. Taxation is the most cost-effective way ofreducing tobacco consumption, especially among young people and those on low incomes.

Price increases encourage people to stop smoking, prevent others from starting smoking, and discourage ex-smokers from starting smoking again.

Studies have shown that theeffect of taxation is more pronounced in developing countries. A price rise of10% decreases consumption by 4% in developed countries and by up to 8 % indeveloping countries. There is considerable scope toincrease tobacco prices through taxation. In many countries, cigarette priceshave not kept up with increases in the price of other goods and services.

Studies have also predicted that cigarette price increases of 33% would prevent 22-65million smoking-related deaths worldwide or 5-15% of all such deaths. An increase of 70% would save 46-114 million smoking-related deaths or 10-26%.Most would be among young men in developing countries.

The tobacco industry’s argumentthat tobacco taxes are unfair to poor people ignores an important fact: onaverage, poor people are also more price sensitive than rich people. They aretherefore more likely to stop smoking or reduce consumption when faced with atobacco tax increase.

Apart from the health benefits,there is evidence that, in the longer term, tobacco tax increases actually shiftthe tax burden from the poor to the rich.

They thereby increase the incomeavailable for other types of spending. Project Coordinator Coalition for Tobacco Control Pakistan CTC-Pak urges the government to further increase taxeson tobacco.

Taxes on tobacco in Pakistan is the lowest as compared to the region.It will not only discourage new smokers but will also decrease the overallconsumption of tobacco among all factions.

Moreover, National Tobacco ControlStrategy (NTCS) must be implemented in letter and spirit which will strengthentobacco control efforts in the country.

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