The Cost of Inaction: Implications of the Cigarette Tax Policy in Pakistan

This Policy Brief was written by the Social Policy and Development Centre (SPDC) in Pakistan. The policy brief estimates the impact of three different Federal Excise Duty rates in the fiscal year 2021-22. In the first scenario, the FED remains unchanged for the third year in a row, reflecting the contents of Finance Act 2021. This lack of action results in more affordable cigarettes, an additional 232,000 adult smokers and 256,000 future smokers, and 81,000 more deaths from smoking-attributable diseases. The second scenario that the researchers examine is a 30% increase in the FED rate, which would reduce the affordability of cigarettes. Despite a significant reduction in cigarette consumption, 29.7 Rs billion would be raised in additional revenue. The 30% increase would also result in 220,000 fewer adult smokers and 243,000 fewer future smokers, avoiding 77,000 deaths from smoking-attributable diseases. Finally, the policy brief considers a 20% increase in the FED rate, which would maintain the affordability of cigarettes at the 2020-21 level. This rate reduces consumption, although less than a 30% increase would (39 million packs and 107 million packs, respectively), while bringing in an additional 34.3 Rs billion. This tax rate would reduce the number of adult smokers by 79,000, future smokers by 87,000, and 27,000 deaths from smoking-attributable diseases would be avoided. The policy brief concludes by recommending a 30% increase in the FED rate to reduce the harmful effects of smoking, while raising additional revenue.