Annual Tax Adjustments, Climate Tax on Tobacco Industry, and Effective Monitoring Can Reduce Smoking and Increase Revenue, Policy Dialogue Told
Islamabad (Staff Reporter) – Health, economic, and environmental experts have urged the government to end the stagnation in tobacco taxation by ensuring annual tax increases in line with inflation, imposing a climate tax on the tobacco industry, and strengthening monitoring systems to curb illicit trade.
The experts warned that Pakistan is paying a heavy economic and social price due to tobacco-related diseases, rising healthcare expenditures, environmental pollution, deforestation, and potential revenue losses. They emphasized that effective tax reforms could not only reduce smoking, save thousands of lives, and protect public health but also significantly increase government revenues.
These views were expressed during a policy dialogue jointly organized by the Sustainable Development Policy Institute (SDPI) and the Social Policy and Development Centre (SPDC).
Speaking on the occasion, SDPI Research Fellow Dr. Irfan Chattha stated that tobacco taxation should not merely be viewed as a revenue-generating tool but as an effective instrument for protecting public health.
He warned that the burden of tobacco-related diseases on the national healthcare system continues to increase, making effective tax policies essential to discourage smoking and reduce treatment costs.
Presenting research findings from SPDC, Managing Director Asif Iqbal said that no changes have been made to the Federal Excise Duty (FED) on cigarettes since 2023 despite the country’s severe financial challenges. He described this approach as “policy inaction” and stated that it is negatively affecting both public health and government revenues.
He explained that because cigarette taxes are imposed at a specific rate, inflation over the past three years has significantly reduced the real value of these taxes. According to SPDC estimates, the real tax burden on low-priced cigarettes has declined by approximately Rs26 per pack, while for premium brands it has decreased by around Rs84 per pack.
Asif Iqbal noted that although cigarette prices have increased, the primary beneficiaries have been tobacco companies. He argued that freezing taxes effectively benefits both the tobacco industry and smokers because cigarettes are becoming relatively cheaper in real terms.
He recommended that the government introduce an automatic annual adjustment of tobacco taxes based on inflation, gradually increase taxes on lower-priced brands to prevent consumers from shifting to cheaper cigarettes, and raise tobacco taxes by at least 21 percent before the approval of the Finance Bill.
SDPI Visiting Researcher Wasim Iftikhar Janjua highlighted the environmental impacts of tobacco, stating that tobacco harms the environment from cultivation to post-consumption waste disposal. He explained that tobacco farming contributes to soil degradation, deforestation, and excessive use of agricultural chemicals, while the curing of tobacco leaves requires substantial quantities of wood and fuel.
He said that the production of a single cigarette consumes approximately 3.7 liters of water and generates an average of 14 grams of carbon dioxide emissions. Globally, tobacco production leads to the loss of around 3.3 million trees annually. He further noted that cigarette filters are a major source of microplastic pollution and cigarette butts release toxic substances into soil and water.
Wasim Iftikhar Janjua stated that tobacco-related waste and environmental damage cost Pakistan billions of rupees every year. He called for the tobacco industry to be required to publicly disclose its pollution and carbon emission data and urged the government to impose a climate tax on the industry in the upcoming budget so that polluters bear the cost of environmental damage.
World Health Organization (WHO) Pakistan representative Wasim Saleem said that the primary objective of tobacco taxation is to reduce tobacco consumption and protect public health.
He rejected the tobacco industry’s argument that higher taxes reduce government revenue. According to him, experiences from Pakistan and various other countries demonstrate that increasing tobacco taxes reduces smoking while simultaneously boosting government revenues.
He explained that rising incomes and population growth maintain cigarette affordability, making a static tax policy ineffective. He also dismissed the claim that higher taxes promote illicit trade, noting that the experiences of countries such as Bangladesh and Sri Lanka show that smuggling and illegal trade are more closely linked to effective monitoring and tax administration than to tax rates themselves.
Senior Researcher at the Prime Minister’s Office, Dr. Nadia Tahir, stressed the need for a comprehensive and evidence-based tobacco control strategy. She said that governments make decisions based on policy priorities rather than narratives alone, making it essential to effectively counter the tobacco industry’s claims regarding revenue generation, employment, and economic benefits with comprehensive evidence-based arguments.