OUR CORRESPONDENT
ISLAMABAD – A recent World Health Organization (WHO) report titled “Study on Incidence of Illicit Trade of Cigarettes in Pakistan: A Case Study for Islamabad Capital Territory” has debunked the tobacco industry’s longstanding claims regarding the size of the illicit cigarette market. The report categorically asserts that “there is no evidence” supporting the industry’s assertions that high taxes significantly drive illicit trade. This was revealed in a presentation during a seminar in Islamabad the other day.
Historically, several studies have estimated that the illicit trade market in Pakistan ranges from 9% to 17%. The WHO report highlights that the profits of one of Pakistan’s largest tobacco companies surged by an impressive 35.8%, amounting to Rs 28.96 billion in 2023, indicating robust financial health despite high taxes.
A World Bank report, “Canada: Controlling Illicit Tobacco Trade,” further undermines the industry’s narrative by documenting cases where tobacco companies themselves instigated illicit trade to counteract tax increases. These companies admitted to such practices in an out-of-court settlement with the Canadian government.
During the seminar, health advocates called for a 40% increase in tobacco taxes in Pakistan to reduce consumption, increase revenue, and address health costs. This tax hike could boost government revenue from Rs 240 billion to Rs 336 billion and significantly reduce health costs associated with smoking, projected to decrease from Rs 615 billion to Rs 418.2 billion, narrowing the gap between revenue and health costs to Rs 82 billion.
Murtaza Solangi, Former Caretaker Minister of Information and Broadcasting, emphasized the need for unity among stakeholders to protect youth from the tobacco industry, which he said is causing billions in losses to the national exchequer. He called for strict enforcement of tobacco laws across all products, including Velo, Gutka, and Pan. Solangi highlighted that low cigarette prices are a key reason for high smoking initiation rates among children and young people. Smoking-related illnesses and deaths impose substantial economic costs, including healthcare expenses and productivity losses.
Malik Imran Ahmad, Country Head of the Campaign for Tobacco-Free Kids (CTFK), reiterated the effectiveness of high tobacco taxation as a measure against tobacco consumption, as advocated by the WHO. He noted that despite tax efforts, cigarette prices in Pakistan remain low in dollar terms compared to many other countries, contributing to sustained high consumption levels. Ahmad called for the introduction of a single-tier tax structure for cigarettes, a reform recommended by both the IMF and World Bank.
Muhammad Asif Iqbal, Managing Director of the Social Policy and Development Centre (SPDC), presented preliminary results from a nationwide survey of over 5,000 smokers. The survey found a 19.2% decline in cigarette consumption following a recent increase in the Federal Excise Duty (FED) on cigarettes. This decline was observed in both urban and rural areas, with a notable shift from high-priced to low-priced or economy brands. The share of economy brands rose from 80% in 2021-22 to 94% in 2023-24, with rural areas showing a higher preference for these cheaper brands.
Despite legal prohibitions, 35% of smokers reported buying loose cigarettes, with higher prevalence in urban areas (44%) compared to rural areas (31%). Additionally, 26.7% of smokers purchased cigarette packs below the government-prescribed minimum price. These findings underscore the need for policymakers to reform tax policies to reduce cigarette consumption effectively.
The WHO report and related studies offer critical insights for evidence-based policymaking aimed at curbing tobacco consumption while maximizing revenue for public health initiatives. As Pakistan continues to battle the economic and health impacts of smoking, higher taxes on tobacco products appear to be a necessary and effective strategy.