Taxing tobacco as a strategy to reduce consumption and increase public health benefits in Pakistan.

Abstract

Background: Tobacco consumption poses a significant challenge to global health and contributes to the increase in noncommunicable diseases and premature deaths.

Aim: To investigate the potential impact of a 70% tobacco tax on consumption and government revenue in Pakistan.

Methods: We analysed secondary data from 2011 to 2022 (after imposition of a 70% excise tax) from the Pakistan Bureau of Statistics, Pakistan Social and Living Standard Survey, financial yearbooks and Federal Board of Revenue reports for tobacco consumption and government revenue. Variables included tobacco price inflation, per capita income, cigarette price, federal excise duty, and government revenue.

Results: The higher taxes reduced tobacco production by PKR 3.72 billion (≈US$ 13.4 million). Price elasticity analysis indicated an inelastic demand for cigarettes, mostly among the rural populations. Imposition of excise duty of 70% of the retail price caused a decrease in government revenue by PKR 390 million (≈US$ 1.4 million).

Conclusion: Implementing 70% taxation on tobacco products is beneficial, however, to fully realize its benefit, there is a need for strict regulation on brand shifting and illegal trade.