A NETWORK of academics and researchers have recently indicated that Pakistan has one of the lowest rates of taxation on tobacco in the world, a fact that has major implications for revenue and public health. Comparing Pakistan to India, which has the same proportion of smokers as Pakistan, they note that the revenue generated in Pakistan from taxes levied on the tobacco industry is six times lower. Total annual revenue from taxation on cigarettes amounts to less than $3.85bn — the amount spent by the government from the public exchequer on smoking-related diseases and deaths in 2019. It is unfortunate how little attention has been paid to tobacco taxation. Cigarette use is the main factor behind preventable deaths worldwide, and smoking is associated with multiple health problems. By imposing further taxes on tobacco products, Pakistan can discourage smokers and reduce the overall usage of tobacco products, thereby improving public health. Second, by not tightening its tobacco taxation policies, the government is losing out on an enormous revenue stream, proceeds from which can be used to improve public services.
If thought out carefully, cigarette taxation can be an effective tool for policymakers to limit tobacco use, reduce harm and generate revenue for improving the delivery of various public goods. Unfortunately, this government’s approach is confusing. Last year, the government ended up giving tax relief to tobacco companies after it raised taxes but also simultaneously increased the taxable price threshold for higher end cigarette brands. This year, it has managed to complicate matters further by enforcing a disproportionate increase in both the minimum sale price of cigarettes as well as federal excise duty rates. Tobacco companies warn that the measure will boost the already poorly controlled illicit cigarette trade. It would serve the government well to study effective tobacco taxation models and their outcomes in other countries, where both the public health threat and revenue challenge have been addressed with more success.
Published in Dawn, April 17th, 2023
