Budget 2022-23: Revenue and Health Implications of Cigarette Tax Policy Options in Pakistan

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Tobacco use continues to remain a major public health problem in Pakistan. The number of adults (age 15+) currently using tobacco in any form is estimated to be 31 million,1 accounting for nearly one-fifth of the adult (age 15+) population. Worldwide, tobacco use is a leading cause of preventable deaths by non-communicable diseases, including cancer, chronic respiratory diseases, and cardiovascular disease.2 According to a recent study, tobacco use killed an estimated 163,360 people in Pakistan in 2017.3 Tobacco use has substantive economic implications as well. The total cost of all smoking-attributable diseases and deaths in Pakistan was estimated to be PKR 615 billion (US$ 3.85 billion) in 2019,4 which includes direct health costs and costs due to lost productivity. Moreover, tobacco use has welfare implications as poor households in Pakistan spend a larger proportion of their budget on tobacco than rich households, resulting in less spending on basic needs.5 As tobacco taxation is globally regarded as the most effective policy tool for curbing tobacco use, this policy note assesses the expected impact of excise tax and price increases on cigarette consumption, tax revenues, and health outcomes in the context of Pakistan, using predictive modelling techniques. The analysis particularly focuses on the recent changes in excise tax rates on cigarettes introduced in the Budget 2022-23 through the Finance Act 2022⎯effective July 1, 2022.