NEWS DESK
ISLAMABAD: The Society for the Protection of the Rights of the Child (SPARC) has suggested an increase in the Federal Excise Duty (FED) in the upcoming Federal Budget 2026–27, including a minimum adjustment of Rs. 35 per pack on economy brands and Rs. 21 per pack on premium brands, alongside a gradual transition toward a unified tax tier structure, noting that this could generate Rs. 51 billion in additional revenue, prevent around 369,000 youth from initiating smoking, and reduce the number of smokers by approximately 271,000 nationwide.
Dr. Khalil Ahmad, Program Manager at SPARC, stated that smoking continues to impose a significant burden on Pakistan’s healthcare system, contributing to approximately 192,000 deaths annually. He noted with concern that cigarette tax rates have remained unchanged since February 2023, leading to a substantial erosion in the real value of tobacco taxes due to inflation. As a result, cigarettes particularly low-cost brands have become increasingly affordable.
He further observed that when tobacco taxes remain stagnant, cigarettes become cheaper in real terms, thereby increasing affordability and drawing more people especially children and youth towards smoking. “Since February 2023, the real FED has declined by about 23 percent, while the tax share on top brands has fallen from 47.4 percent to 41.7 percent. This widening policy gap requires urgent correction,” he added.
Dr. Khalil Ahmad highlighted that Pakistan remains among the cheapest cigarette markets in the region. A pack of 20 cigarettes costs Int$3.46 in Pakistan, compared to Int$6.32 in the Eastern Mediterranean Region (EMR) and Int$10.91 in South-East Asia (SEA), making cigarettes approximately 83 percent cheaper than EMR and up to 215 percent cheaper than SEA. He warned that this significant price disparity fuels higher consumption and increases the risk of youth initiation.
Beyond health concerns, he emphasized that tobacco use represents a major economic burden. The annual economic cost of smoking in Pakistan is estimated at Rs. 1,835 billion around 1.6 percent of GDP, far exceeding the revenue generated from tobacco taxation. The evidence is clear: tobacco costs Pakistan far more than it contributes. Healthcare expenditures and productivity losses associated with smoking related diseases amount to billions each year. A progressive, inflation adjusted tobacco taxation policy is essential to reverse this trend.
He further recommended a pragmatic and progressive taxation approach, suggesting higher annual FED increases on economy brands (around 35 percent) and inflation-indexed increases on premium brands (around 6.5 percent), in order to narrow the price gap between tiers. He stressed that reducing this gap is critical, as cheaper cigarettes are more likely to attract young and first-time smokers.
Addressing concerns regarding illicit trade, Dr. Khalil Ahmad stated that independent evidence indicates it accounts for approximately 33–34 percent of total cigarette consumption. He further emphasized that, as a signatory to the World Health Organization Framework Convention on Tobacco Control, Pakistan is obligated to strengthen tobacco taxation to safeguard public health. He added that under the MPOWER strategy, increasing tobacco taxes is widely recognized as the most effective measure to reduce tobacco consumption.
He further stated that increasing the Federal Excise Duty by Rs. 35 on economy brands and Rs. 21 on premium brands is aligned with global best practices. It will strengthen national revenue, fulfill Pakistan’s international commitments, and most importantly protect children and youth from lifelong addiction
