Cigarette prices in Pakistan lowest in the region due to lenient tax policy?

ISLAMABAD: Pakistan stands out in the region for remarkably low cigarette prices due to the country’s lenient tax regulations for both premium and value-for-money (VFM) segments when compared to India, Sri Lanka and Bangladesh.

Dr Aman Khan, Waseela Foundation told media here on Monday that the core of Pakistan’s tobacco market dynamics is its tax policy, which is notably more lenient than those of its regional neighbours.

In countries like India and Sri Lanka, governments have implemented stringent tax regimes on tobacco products as a public health measure. These policies are designed to curb smoking rates by elevating the cost of cigarettes, thus making them less affordable, he said.

When compared with Bangladesh where a high percentage of cigarette prices comprising taxes, Pakistan’s taxation on cigarettes is relatively low. This difference in tax structure is a principal factor behind the lower prices of cigarettes in Pakistan, Aman said.

He said that disparity in prices of cigarettes in the region is quite evident in Pakistan.

For premium brands, the price in Pakistan is considerably lower than in India, Sri Lanka, or Bangladesh. A pack of premium cigarettes in Pakistan might cost around USD 1.50, while the same could be upwards of USD 3.00 in India or Bangladesh and even higher in Sri Lanka, he said.

The value-for-money segment exhibits a similar trend. In Pakistan, these cigarettes are priced as low as USD 1.00 per pack, whereas in neighboring countries, the prices are often double or more, he added.

While talking about the rational rationale behind Pakistan’s lax tax policies on cigarettes, he said it could be multifaceted.

One perspective could be the economic approach, where the government aims to maintain affordability for a larger population segment, considering the country’s lower average income levels. Secondly, the tobacco industry is a significant contributor to Pakistan’s economy, and higher taxes might adversely impact this sector.

He said that the Pakistan’s cigarette pricing, particularly in the premium and VFM segments, is a direct result of its comparatively lax tax policies on tobacco products.

Talking about the domestic tax policies, he said that it would be pertinent to mention that when the Federal Board of Revenue conceded to tobacco lobbying and introduced three-tier system on the pretext of curbing illicit market share, it resulted in massive loss for the country.

On the contrary, whenever FBR has taken independent decision such as abolishing three-tier structure, recent increase in taxes and implementation of Track and Trace system, it resulted in increasing revenues of the government and discouraging the use of tobacco by making it unaffordable, he added.

Copyright Business Recorder, 2023