According to a report by Dawn News on May 11th, despite the proposal by the Pakistan Ministry of Health to increase the Federal Excise Duty (FED) on tobacco by 20%, the World Health Organization (WHO) has urged for a 37% increase in order to raise the tax share of retail prices to the international standard of 70%.
Anti-smoking activists have submitted a tax proposal to the Ministry of Health, which includes recommendations from the World Health Organization. The WHO emphasizes that raising tobacco taxes not only helps alleviate the pressure on healthcare systems but also increases tax revenue.
According to the tax proposal, maintaining the current level of federal excise tax (FED) could lead to a decrease in healthcare recovery. To achieve the healthcare cost recovery levels observed during the same period in 2023-2024, increasing the federal excise tax (FED) rate by 37% next year will help generate an additional 60 billion rupees (approximately 2.96 billion RMB) in value-added tax from tobacco.
This tax proposal also rejects the notion that increasing taxes will curb illegal trade, citing relevant studies that show tobacco companies falsifying their production reports to influence tax policies. For example, in Pakistan, currently, 31.6 million adults use tobacco, causing over 160,000 deaths each year, with smoking-related diseases and deaths accounting for at least 1.4% of the Gross Domestic Product (GDP) annually. Tax revenue from July 2023 to January 2024 reached 122 billion rupees, with an estimated total exceeding 200 billion rupees for the year.
This tax proposal calls for an increase in taxes that will help save lives, and requires the government to consider embedding a cost recovery mechanism in tobacco tax policies for the 2024-2025 fiscal year. This would ensure that a portion of all health costs caused by smoking is covered through automatic adjustments to consumption taxes.
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