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Pakistan tobacco tax report launched at a critical time

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Just weeks before Pakistan will decide its next national budget, a new report published by The Union highlights the impact tobacco tax reform could have on both public health – and the public purse.

The Economics of Tobacco and Tobacco Taxation in Pakistan found that tax reform could lead to half a million smokers quitting – a significant public health benefit for a country that is home to more than 22 million adult smokers, one of the world’s largest populations of tobacco users. The changes proposed by the authors would also increase tax revenues by 27.2 billion rupees.

“Very low excise taxes have resulted in cigarettes in Pakistan being among the most affordable in the world,” said Dr Rajeev Cherukupalli, an economist at the Johns Hopkins Bloomberg School of Public Health, and an author of the study. “Simplifying taxes and transitioning to a high specific excise tax will reduce tobacco use, raise tax revenue and save lives.”

The study’s key recommendations were discussed at the launch event in Islamabad on May 27, which was attended by government representatives, tobacco control advocates and economic affairs journalists.  The principal goal highlighted in the report, to raise a uniform specific excise tax to account for 70% of the average cigarette price, is in line with the World Health Organization’s Framework Convention on Tobacco Control (FCTC), which came into force in Pakistan in 2005.

Dr Minhaj us Siraj, Director of Tobacco Smoke-Free Islamabad, attended the launch event and applauded the report’s findings. “Thirty-seven percent of Pakistan’s adult male population already smoke. This is almost a saturated market, so in order for the tobacco industry to grow, they hunt for fresh clients amongst females -- just seven percent of women smoke today. They even target children, who once addicted will become customers for life. Raising tobacco taxes from around fifty-six percent, as they are now, to the FCTC recommended seventy percent, will go a long way towards keeping tobacco products out of the reach of children and will make tobacco use a less sustainable habit for the population as a whole.”

Dr Ehsan Latif, Director of Tobacco Control at the International Union Against Tuberculosis and Lung Disease, said, “Pakistan needs continued support to put this report’s recommendations into place. An effective roadmap to make these changes will include annual tobacco tax increases at an optimal level, so that rates do not have to be re-negotiated at the start of each financial year. The government is now well-placed to do this, and The Union can offer strong technical assistance to support this process. Effective implementation of these tax measures will prevent much suffering and disease, and increase tax revenues that can then be earmarked for health promotion.”

Whether the government will act on the recommendations will be a story closely followed by both tobacco control supporters – and the tobacco industry.

The FCTC is the world’s first public health treaty and has now been ratified by 178 countries, representing almost 90 percent of the global population.  Yet measures like the 70% tax have so far been enacted in only 32 countries. “Progress may be slow,” said Latif, “but we have evidence that these measures work. Countries like Egypt that have introduced taxes at this level have seen the numbers of smokers drop by 1.09 million in four years.”

The Economics of Tobacco and Tobacco Taxation in Pakistan is available as a full report and factsheet.