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High Tobacco tax reduces cigarette consumption

Islamabad: The consumption of cigarettes in Pakistan has witnessed a significant decline after the government took a bold decision to increase taxes and address the dual challenge of public health and revenue generation.

A study by the Capital Calling, a network of academic researchers and professionals, a few months back has been proved right. The study has revealed then that one in every 94 smokers has quit smoking after the price increase.

“The government’s decision to increase taxes emerged as a pivotal strategy to address both public health concerns and revenue deficits,” said the report.

The government had finally agreed to increase taxes following persistent lobbying efforts by numerous anti-tobacco and social activists.

In a groundbreaking move, the FBR had elevated the duty on tier-1 cigarettes from 130 rupees to 330 rupees, resulting in a significant net increase of 154 percent.

The decision was aimed at increasing the revenue to Rs 200 billion from Rs 148 billion in the current fiscal year.
According to details, the survey was conducted in major cities including Islamabad, Rawalpindi, Lahore and Peshawar.

The voices of the surveyed smokers echoed a common sentiment – purchasing cigarettes had become financially burdensome, leading them to prioritize spending on essential needs like food and the education of their children.

The survey findings presented a compelling evidence in favor of the higher taxes – the tobacco industry was causing a staggering loss of approximately 620 billion rupees annually in terms of diseases including cancer, chronic respiratory diseases, and cardiovascular disease, besides 337,500 deaths each year.

Pakistan lost a staggering 567 billion rupees in potential revenue due to the influence of cigarette companies lobbying for low taxes in past seven years.

“Despite losses on various fronts, including public health and revenue, pervasive propaganda has been a hindrance to implementing higher taxes” .

Multinational tobacco companies had raised concerns about the prevalence of illegal and illicit cigarettes in the Pakistani market, suggesting a share close to 40 percent.

However, on-the-ground surveys and interviews contradicted these claims, revealing that the actual share of illicit and illegal cigarettes was not more than 18 percent. This figure included smuggled brands from the very multinational companies expressing concern.

The evidence suggests the sales of cigarettes would further decrease in the coming months across Pakistan if the government further increase FED on Tobacco sector.