SPARC, an NGO based in Rawalpindi, has recommended a marked hike in the Federal Excise Duty for cigarettes before Pakistan’s next federal budget for 2026–27, stating that hiking cigarette taxes in the country’s budget 2027 will result in billions in additional government income, as well as safeguarding hundreds of thousands of young Pakistanis from becoming cigarette smokers. The SPARC team made their recommendation while the government of Pakistan was nearing the final phase of preparing its budget, and at a time when SPARC was effectively exploiting the opportunity to convince the policymakers that taxing cigarettes is one of the most effective ways of achieving both objectives simultaneously.
What the cigarette tax proposal does is provide a specific amount in terms of expected revenues in this regard, as the Rs51 billion figure shows. In a scenario where Pakistan needs to ensure continuous revenue generation as per its IMF fiscal consolidation policy, having such a policy that brings in Rs51 billion of revenue and at the same time promotes public health seems like a winning strategy.
SPARC suggests an increase of Rs35 in price floor for low-end packs and Rs21 in premium cigarettes
The budget 2027 tax structure for cigarettes proposed by the government also provides an insight into how much the price needs to be increased along with FED increases. The SPARC report suggests increasing the price floor for low-cost cigarette packs by Rs35 and high-end packs by Rs21. This is a differential pricing strategy, where the highest price hike occurs for the lowest priced cigarettes.
This strategy relies on evidence from studies that have found price elasticity to be much higher in case of young people and low-income groups who do not have any established smoking behavior. In this way, the increased rate of Rs.35 in the cheapest cigarette packs would create an additional financial hurdle for new smokers entering the market; therefore, this cigarette tax plan would be a preventive tool for the budget of Pakistan 2027.
Uniform transition to tax system intended to reduce price difference among cigarette tiers
While the FED hike is an urgent matter of concern, the SPARC cigarette tax proposal for Pakistan budget 2027 focuses on the necessity of adopting a uniform tax system in all cigarette price ranges. The present FED system adopted by Pakistan results in huge differences in prices between high-tier and low-tier cigarette brands. Tobacco firms capitalise on this price disparity through the use of extremely inexpensive cigarettes which have the effect of rendering any increase in taxes levied against high-end cigarettes meaningless in terms of their contribution to public health.
The use of a universal tax policy eliminates such disparities, thus making it increasingly difficult for smokers to move down the price ladder. According to SPARC, it takes time for the market and the industry to adjust to the new changes, and during this period, the lowest-cost brands become unavailable and unaffordable.
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Cigarette taxes hike can save around 370,000 youth from smoking
The most notable statistic about Pakistan cigarette tax budget for 2027 is neither about the revenue figures nor any other data. According to the experts quoted in the SPARC submission, the combined effects of the proposed hike in FED along with increasing minimum package price and a move towards unified tax systems would save around 370,000 Pakistanis from taking up smoking.
But behind this statistic lie 370,000 young Pakistani individuals who will never initiate smoking; never accrue any kind of health issues due to smoking; nor will they put a strain on the healthcare infrastructure by being chronic smokers.. Such a large-scale effort to prevent youth from taking up smoking will yield economic benefits far more extensive than those implied by the Rs51 billion figure.
A total of 270,000 smokers will be persuaded to quit smoking due to increased costs
An estimated 270,000 people who smoke regularly might stop doing so because of the higher cost.
The quitting of smoking on such a large scale adds to the positive impact that the cigarette tax would bring, which is both financial and health-related. Each person who stops smoking will decrease their personal medical risks, increase their productivity, and ensure that family expenses are not going towards tobacco but rather towards a more productive use. When considering the overall benefits and costs of implementing the SPARC plan for the budget of Pakistan for 2027, there is hardly an equivalent alternative method for achieving the same outcome.
