High prices slash cigarette consumption by over 11 billion sticks

Islamabad: Pakistan has witnessed a significant dip in cigarette consumption due to high prices, and a survey by the Centre for Research and Dialogue (CRD) has validated that taxation is the lynchpin for controlling and curbing cigarette consumption.

“Cigarette consumption has come down by more than 11 billion sticks following introduction of higher Federal Excise Duty (FED),” said Maryam Gul Tahir, Director of CRD.

"By adopting these measures, Pakistan can follow a tried and tested approach to decreasing cigarette consumption, improving public health outcomes, and simultaneously boosting government revenue through increased taxation on tobacco products," she said.

According to WHO, “increasing tobacco taxes by 10% generally decreases tobacco consumption by 4% in high-income countries and by about 8% in low- and middle-income countries.”

She said that embracing high cigarette taxes as a deterrent can significantly reduce tobacco consumption and the associated health costs.

Pakistan is grappling with a major health problem as more than 31 million adults (ages 15 and above) are estimated tobacco users (in various form), this number translates to nearly one-fifth of the adult (ages 15 and above) of the country.

Pakistan has two-tier FED structure and its share in retail prices is 48% and 68% respectively for low and high tiers. A multitude of research studies and surveys have validated that increased taxation help reduce cigarette consumption.

A recent survey by the CRD has highlighted a significant shift in smoking habits, revealing that 18% of respondents quit smoking due to increased cigarette prices.

The survey results indicate a robust correlation between cigarette prices and tobacco consumption. A notable 63% of respondents believe that higher tobacco prices reduce smoking rates.

Additionally, around 15% of smokers reported cutting down their cigarette intake due to the increased costs. The total reduction in consumption is estimated to be approximately 20 billion cigarettes per year.

In 2022, Pakistan's total cigarette consumption ranged between 72 to 80 billion sticks, encompassing officially declared production, smuggled cigarettes, counterfeit products, and cigarettes for which duties have not been paid. These figures highlight the extensive reach of tobacco use in the country and the potential impact of rigorous taxation policies.

Earlier this year, the International Monetary Fund (IMF) recommended authorities to adopt a single-tier tax structure and simplify the taxation.

Meanwhile, the World Bank pointed out that applying the current premium cigarette tax rate (Rs. 16.50 per cigarette) to all cigarette categories could generate an additional 0.4 percent of GDP, amounting to PKR 505.26 billion.