ISLAMABAD – The Social Policy Development Center (SPDC) has proposed a 37 percent increase in the Federal Excise Duty (FED) on tobacco products to increase the results already made and promote public health outcomes and revenue collection.
“Pakistan could save 265,000 lives, generate additional revenue of $37.7 billion, and encourage 757,000 people to quit smoking by increasing the FED by 37 percent,” SPDC said in its policy document, “Recovering Health Spending and Saving Lives.” It is in line with the advice of the World Health Organization (WHO) and the Campaign for Tobacco-Free Children (CTFK).
The proposal comes as the government prepares a budget plan to prioritize public health and economic prosperity through tobacco tax reform.
Pakistan has a two tier FED system in tobacco. Significantturt has taken a big step and increased the FED on cigarettes with a significant increase in the FED in 2022-23. The FED’s share of current retail prices is 48 percent and 68 percent for the low and high levels, respectively.
The SPDC says that if the rate (FED) is not raised and the trend is not stopped, this can have a negative impact on both income and health care businesses.
Therefore, the FED should be further adjusted in accordance with international standards to take the share of retail price tax up to 70 percent.
The proposal seeks to increase the FED’s share to 54 percent or 154 and 72.1 percent or 452 percent for economy and premium brands.
This proposal is supported by previous tax reforms that have shown significant reductions in cigarette prices and significant financial gains for the government.
According to the details, revenue collection reached $122 billion from July 2023 to January 2024 and is expected to exceed $200 billion by the end of the year.
In addition to generating revenue, it helps reduce smoking rates and offsets 17.8 percent of the total health costs related to tobacco diseases in Pakistan.
