Economists and health specialists urge inflation-linked increases and environmental levy to curb smoking and pollution
ISLAMABAD: Economists, public health specialists and environmental experts have called on the government to end the ongoing freeze on tobacco taxation, introduce annual inflation-linked tax increases and impose a climate levy on the tobacco industry to address rising health and environmental costs.
The demand was made during a policy dialogue titled “The Cost of Inaction: Tobacco Tax Freeze in Pakistan’s 2026-27 Budget”, jointly organised by the Sustainable Development Policy Institute (SDPI) and the Social Policy and Development Centre (SPDC).
Participants warned that the prolonged freeze on tobacco taxation is weakening public health efforts, reducing potential fiscal revenue and allowing the industry to avoid accountability for environmental damage linked to tobacco production and consumption.
Experts Criticise Tobacco Tax Freeze
Speaking at the event, SDPI Research Fellow Dr Irfan Chatha said tobacco taxation should be treated primarily as a public health tool rather than a revenue stream.
He noted that Pakistan’s tobacco tax levels remain significantly lower than many countries, adding that higher taxation has proven effective globally in reducing smoking rates.
Dr Chatha said tobacco-related diseases continue to place a heavy burden on Pakistan’s healthcare system, stressing the need for stronger tobacco taxation to discourage consumption and reduce long-term costs.
Calls for Inflation-Linked Tax Adjustments
SPDC Managing Director Asif Iqbal said no changes have been made to the Federal Excise Duty (FED) on cigarettes since 2023 despite rising inflation.
He argued that the freeze has eroded the real value of tobacco taxation, as fixed excise duties fail to adjust with price increases.
He added that cigarette manufacturers have largely benefited from rising retail prices rather than the government.
Iqbal recommended annual inflation-based revisions and suggested at least a 21 per cent increase in tobacco taxation in the upcoming fiscal cycle.
Climate Levy Proposed for Tobacco Industry
SDPI Visiting Researcher Waseem Iftikhar Janjua highlighted the environmental cost of tobacco production, calling for a dedicated climate levy on the industry.
He said tobacco cultivation contributes to deforestation, pesticide use, water depletion and carbon emissions, while cigarette waste adds to microplastic pollution.
He added that producing a single cigarette consumes around 3.7 litres of water and generates significant carbon emissions, underlining the environmental burden.
Janjua said a climate levy on the tobacco industry could help recover environmental costs and encourage more sustainable practices.
WHO Supports Higher Tobacco Taxation
World Health Organization (WHO) Pakistan representative Waseem Saleem supported higher tobacco taxation, saying international evidence shows it reduces consumption while increasing government revenue.
He rejected claims that higher taxes increase illicit trade, arguing that enforcement gaps are the real issue behind smuggling.
Call for Evidence-Based Policy Reform
Senior researcher Dr Nadia Tahir emphasised the need for evidence-based policymaking, including stronger data on revenue, employment and environmental impacts of tobacco regulation.
She said a comprehensive approach is needed to balance public health priorities with economic considerations.
Growing Consensus for Reform
The dialogue concluded with broad agreement among experts that Pakistan should implement regular inflation-based tobacco tax increases and consider a climate levy on the industry.
Participants said such reforms could help reduce smoking rates, improve public health outcomes, generate additional revenue and address the environmental impact of tobacco production.
