ISLAMABAD – The government’s decision to raise the Federal Excise Duty (FED) on cigarettes has yielded a notable revenue increase while contributing to a reduction in cigarette consumption.
The Federal Board of Revenue (FBR) Yearbook 2022-23 substantiated the noteworthy development, according to which the share of cigarettes in the overall Federal Excise Duty (FED) collection has escalated to 40 percent.
The report said that the share of the top ten sectors is about 94 percent, and cigarettes stood at the top of the list, followed by cement with 18.7 percent and concentrates with 9.6 percent.
This upswing is chiefly attributed to the imposition of higher FED rates on cigarettes. The fiscal year 2022-23 saw three significant upward revisions, ending a three-year stagnation period.
The FBR Yearbook said cigarettes were one of the major sectors contributing to FED revenues due to both inflation and an increase in excise duty rates.
As cigarette consumption diminishes, the consequential reduction in health-related issues could positively impact healthcare expenditures, contributing to a healthier and more sustainable society.
The decrease in tobacco usage also aligns with the broader public health objective.
A study by the Pakistan Institute of Development Economics (PIDE) highlights the significant economic impact of tobacco use. According to the study, costs linked to diseases and deaths resulting from smoking in 2019 reached a staggering Rs 615.07 billion ($3.85 billion), equivalent to 1.6 percent of the GDP.
Commenting on the development, Malik Imran Ahmed, Country Director of the Campaign for Tobacco-Free Kids (CTFK), said that the tobacco industry had expressed discontent over the increase in FED, claiming it would result in the shutdown.
However, the FBR’s data has challenged the industry’s assertion, showing a significant 40 percent share of the FED.
Independent experts have emphatically called upon the FBR to implement World Bank’s recommendation advising increase in FED on cigarettes, in a recent report Pakistan Development Update (PDU).
“A substantial revenue gain of 0.4 percent of GDP could be achieved if the current rate on premium cigarettes (PKR 16.50 per cigarette) was also applied to standard cigarettes,” the report said.
The WHO Framework Convention on Tobacco Control (FCTC) guidelines also emphasise taxation’s pivotal role as a primary tool in mitigating tobacco consumption.
