By: Ashfaq Ahmad
Tobacco taxation is widely recognized as one of the most effective and evidence-based strategies to reduce tobacco consumption and protect public health. According to the World Health Organization, increasing tobacco taxes directly raises retail prices. It discourages smoking, particularly among young people and low-income populations who are most sensitive to price changes. Global evidence shows that a 10% increase in tobacco prices can reduce tobacco consumption by about 4% in high-income countries and nearly 5% in low- and middle-income countries. This demonstrates that fiscal policies are not only economic tools but also powerful public health interventions.
The effectiveness of taxation is further illustrated by global projections. The World Health Organization estimates that if governments increased excise taxes sufficiently to raise cigarette prices by 50% worldwide, it could result in 49 million fewer smokers and prevent around 11 million tobacco-related deaths. These figures highlight the transformative potential of taxation policies when implemented decisively and consistently.
In Pakistan, the case for stronger tobacco taxation is particularly compelling. Current data indicate that 31.6 million adults—approximately 19.9% of the adult population—use tobacco, placing a substantial burden on the country’s health system and economy. Tobacco use is responsible for more than 163,000 deaths each year, making it one of the leading preventable causes of mortality in the country. Beyond the tragic loss of life, tobacco-related diseases impose a heavy financial cost. Estimates suggest that smoking-related illnesses and premature deaths cost Pakistan around 1.4% of its Gross Domestic Product annually, due to healthcare expenditures and productivity losses.
Evidence from Pakistan’s recent fiscal reforms demonstrates that tobacco taxation can produce a triple dividend: reducing smoking prevalence, increasing government revenue, and lowering healthcare costs. For instance, reforms in the Federal Excise Duty (FED) structure on cigarettes during 2022–23 generated substantial revenue growth. Between July 2023 and January 2024 alone, tobacco FED collections reached approximately PKR 122 billion, with annual revenues projected to exceed PKR 200 billion. These reforms are also expected to generate an additional PKR 60 billion in sales tax revenue, showing that stronger tobacco taxes can significantly strengthen public finances.
However, Pakistan’s tobacco tax structure still contains weaknesses that allow the tobacco industry to maintain product affordability. The existing two-tier FED system, which taxes cigarettes differently based on price segments, creates opportunities for the industry to manipulate prices and shift consumers toward cheaper brands. International best practice suggests that tobacco taxes should constitute at least 75% of the retail price of cigarettes and should be regularly adjusted to keep pace with inflation and income growth.
Strengthening tobacco taxation, by simplifying the tax structure, increasing excise duties, and closing loopholes, would align Pakistan with global public health standards. More importantly, it would reduce tobacco consumption, protect young people from nicotine addiction, and generate critical revenue for health and development.
Ultimately, tobacco taxation is not merely a fiscal policy; it is a life-saving intervention. For Pakistan, decisive and sustained action on tobacco taxes represents both a public health necessity and an economic opportunity to safeguard the well-being of future generations.
Writer is Communication Officer at Society for Alternative Media and Research (SAMAR) /Coalition for Tobacco Control Pakistan (CTC-Pak) ashfaq@alternativemedia.org.pk
