Increase Tobacco Tax for a Sustainable Pakistan

Tobacco taxation is one of the most effective ways to reduce smoking, improve public health, and generate revenue for national development. In Pakistan, tobacco-related diseases impose a massive economic and health burden.

Reports from the Social Policy and Development Centre (SPDC) and the World Health Organization (WHO) reveal that strategic tax hikes can significantly reduce smoking rates while increasing government revenue. The question is: how can this additional revenue be used to build a more sustainable Pakistan?

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Tobacco Taxation: A Proven Strategy

The 2023 tax increase on cigarettes in Pakistan led to a 19.2% reduction in consumption while boosting tax revenue by 66% (SPDC). This proves that higher tobacco taxes discourage smoking while securing more funds for critical public services. Yet, cigarette affordability remains a challenge. Between 2023 and 2024, Pakistan’s per capita income grew by 12.5%, but cigarette prices rose by only 2.7%. This gap makes smoking more accessible, especially to the youth.

Without stronger tax policies, 490,000 more people could start smoking in 2025-26. The solution is simple: raise the Federal Excise Duty (FED) on tobacco products to make them unaffordable and direct the revenue toward sustainable development.

Using Tobacco Tax Revenue for a Better Future

Pakistan collected Rs 237 billion in tobacco taxes in 2023-24. Instead of treating this revenue as a general fund, it should be strategically allocated to essential sectors such as education, healthcare, and infrastructure.

1. Education: Investing in Future Generations

Tobacco tax revenue can fund scholarships and free education programs, ensuring that financial barriers do not prevent children from attending school.

Only 46% of Pakistani students receive tobacco-related health education. Increased tax revenue should support school awareness programs to prevent youth initiation.

Students educated about tobacco risks are less likely to smoke. Investing in education can create a more informed and healthier generation.

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2. Healthcare: Reducing the Disease Burden

Tobacco-related health costs consume 1.6% of Pakistan’s GDP. A significant portion of tax revenue should be allocated to improving healthcare facilities.

Increasing tobacco taxes can result in 263,000 fewer smokers, leading to lower medical costs and healthier communities.

WHO estimates that higher tobacco taxes could save 264,000 lives by preventing premature deaths.

More revenue means better access to cessation programs, helping the 70.6% of young smokers who want to quit.

3. Infrastructure: Building a Healthier Environment

Higher tobacco taxes can fund clean water, better roads, and sustainable urban projects.

Over 30% of students face secondhand smoke in outdoor public spaces. Increased tobacco taxes can help reduce smoking prevalence and improve air quality.

76.2% of students support smoking bans in public places—higher tax revenues can help enforce these regulations.

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Addressing Loopholes: Strengthening Taxation Policies

1. Uniform Tax Structure to Prevent Brand Switching

Many smokers switch to cheaper brands rather than quitting. Implementing a single-tier tax system will close this loophole and maximize health benefits.

2. Combating Smuggling and Tax Evasion

The Track & Trace system is crucial for monitoring cigarette production and preventing illicit trade. Full implementation can significantly increase government revenue.

3. Indexing Taxes to Inflation

WHO recommends indexing tobacco taxes to inflation to ensure a continuous reduction in smoking rates while maintaining a steady revenue stream for public services.

Global Lessons: Learning from Successful Policies

Countries like the UK, Australia, and the Philippines have successfully used tobacco taxation as a tool for sustainable development. The Philippines, for example, allocates a significant portion of its tobacco tax revenue to universal healthcare programs, proving that tax policies can drive national progress.

Pakistan’s tobacco taxes are still below WHO’s recommended 70% benchmark. Aligning with global best practices will not only reduce smoking rates but also provide sustainable funding for development initiatives.

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A Call for Action

For Pakistan to move toward a healthier and more sustainable future, policymakers must:

Increase the Federal Excise Duty (FED) on tobacco products in the upcoming Financial Budget 2025/26.

Ensure transparent allocation of tobacco tax revenue toward education, healthcare, and infrastructure.

Strengthen enforcement to curb smuggling and tax evasion.

Conclusion

Tobacco taxation is more than just an economic tool—it is a public health and sustainability strategy. By increasing tobacco taxes and directing the revenue toward national development, Pakistan can reduce smoking, improve public health, and secure a better future for all.

The evidence is clear. The time for action is now. Increase tobacco tax for a sustainable Pakistan.

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