Finance Act 2024: Implications of Cigarette Tax Policy

This Policy Brief was written by Social Policy and Development Centre in Pakistan. The policy brief assesses the impact of the recently passed Finance Act 2024, which modified the FED price tiers and strengthened tax administration, but did not raise excise tax rates. Despite the lack of tax increases, it set a goal of a 50% increase in revenues, which is likely unrealistic. The Finance Act increased the price limit for low-price cigarettes from Rs 101 to Rs 250 per 20-stick pack, which will actually benefit companies that produce cheaper cigarettes rather than increase excise tax revenues. The Act also raised the price of a pack of cigarettes from Rs 108 to Rs 150. In the context of these changes, the researchers find that 22% of brands will have to increase prices to the new minimum price without contributing to the FED, 59% of brands may increase prices to the new price limit for low-price cigarettes without contributing to the FED, and 19% of brands may increase prices from old minimum price to the new one without contributing to the FED. The policy brief concludes with recommendations for policy makers to raise excise tax rates in addition to the other tobacco control measures in order to achieve established revenue goals.