Govt can boost revenue by 40% with Optimized Tobacco Taxation, report reveals

ISLAMABAD (92 News) - Health advocates have proposed a 40% increase in taxes on tobacco products in Pakistan to reduce consumption, increase revenue and bridge the gap in health costs associated with smoking.

This proposed increase would translate into a substantial rise in government revenue, estimated to reach Rs 336 billion from the current Rs 240 billion. The intervention would also significantly impact health costs associated with smoking, projected to be reduced from Rs 615 billion to Rs 418.2 billion, effectively reducing the gap between revenue and health costs to Rs 82 billion.

Former Caretaker Minister of Information and Broadcasting Murtaza Solangi said all stakeholders must cast their differences aside and unite to protect their children and youth from an industry which is causing billions of losses to the national exchequer. “Increasing tobacco taxes is such a step which should be regularly implemented. The low cigarette prices are the reason why children and young people initiate smoking.”

He added that smoking-related illnesses and deaths incur substantial economic costs in Pakistan's GDP every year. These increasing health cost burdens encompass healthcare expenses, productivity losses due to illness and premature death, as well as other indirect economic impacts.

Malik Imran Ahmad, Country Head Campaign for Tobacco Free Kids (CTFK), said that the effectiveness of high tobacco taxation as a vital measure in combating tobacco consumption, as advocated by the World Health Organization (WHO). “The industry can absorb at least a 40% increase in taxes, and the IMF and World Bank have recommended Pakistan introduce a single-tier tax structure for cigarettes. Despite efforts to increase taxes, low cigarette prices persist, contributing to sustained high consumption levels. By adopting these reforms, Pakistan can make cigarette taxation more effective and align it more closely with international best practices,” he added.

He said that the cigarette prices in Pakistan are still cheaper than in many parts of the world.

Malik Imran said that the illegal market share is exaggerated by multinational companies. “The industry has been found to underreport production to evade taxes, violating tax laws and prioritizing profits over public health,” he opined.

Muhammad Asif Iqbal, Managing Director of the Social Policy and Development Centre (SPDC), said smokers’ response to price changes suggests an enormous potential for taxation to discourage smoking in Pakistan. “As a result of the recent hike in the FED on cigarettes and the corresponding increase in prices, cigarette consumption has declined by 19.2%,” he added.