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ISLAMABAD, June 23, 2026: Experts on Tuesday urged the government to end the freeze on tobacco taxation. They also called for annual inflation-linked tax increases and a possible climate levy on the tobacco industry. They warned that delays are increasing pressure on Pakistan’s health system, economy, and environment.
The Sustainable Development Policy Institute (SDPI) and the Social Policy and Development Centre (SPDC) jointly organized the policy dialogue titled “The Cost of Inaction: Tobacco Tax Freeze in Pakistan’s 2026-27 Budget.”
First, SDPI Research Fellow Dr. Irfan Chatha said policymakers should treat tobacco taxation as a public health tool, not just a revenue source. He added that many countries already impose far higher taxes, including Vietnam, where taxes reach about 60 percent of retail price. He stressed that stronger taxes can reduce smoking and ease healthcare costs.
Next, SPDC Managing Director Asif Iqbal criticized the lack of change in Federal Excise Duty since 2023. He said this reflects policy inaction despite fiscal pressure. Moreover, he noted that inflation has eroded the real value of cigarette taxes. As a result, the effective tax burden has dropped sharply across both economy and premium brands.
He further explained that price increases have mainly benefited tobacco companies rather than the state. Therefore, he urged the government to introduce automatic inflation-based tax adjustments. He also recommended higher taxes on low-cost cigarette brands to prevent consumers from switching to cheaper alternatives. In addition, he suggested at least a 21 percent tax increase in the upcoming budget.
Meanwhile, SDPI Visiting Researcher Waseem Iftikhar Janjua highlighted the environmental damage caused by tobacco. He said the industry contributes to deforestation, land degradation, and emissions. In addition, he noted that cigarette production consumes large volumes of water and generates carbon emissions. He also pointed to plastic pollution from cigarette filters and butts.
Furthermore, he urged the government to hold the industry accountable for its environmental footprint. He recommended mandatory emissions reporting and strict environmental compliance. He also proposed a climate tax on tobacco in the next budget.
Similarly, WHO Pakistan representative Waseem Saleem rejected claims that higher taxes reduce revenue. Instead, he said evidence shows tax hikes reduce consumption while increasing revenue. He added that illicit trade depends more on enforcement than tax rates. Therefore, he called for stronger monitoring systems and better enforcement capacity.
Finally, Dr. Nadia Tahir from the Prime Minister’s Office called for a more evidence-based policy approach. She said policymakers must respond to data rather than industry narratives. At the same time, she stressed the need to strengthen coordination with parliament and improve regulatory systems.
