Cigarette price hike fuels illicit trade, undermines public health efforts in Pakistan

New study reveals unintended consequences of tax increase on smoking behavior

Karachi, 2024: Despite the government’s efforts to curb tobacco consumption through price increases, a recent study has revealed a significant shift towards cheaper, tax-evaded cigarette brands, undermining public health initiatives and revenue collection.

Around 89% respondents of the survey acknowledged that their consumption did not decrease despite the price hike, with 80% opting for cheaper brands. 71% of the people of Pakistan recently changed their current cigarette brand. A staggering 67% of the people shifted to illegal (tax-evaded) cigarette brands due to cheaper prices, whereas only 33% continued to consume tax-paid cigarettes.

The study titled “The Impact of Cigarette Price Increase on Smoking Behavior & Patterns” conducted by Umeed-e-Sehar, an organization working for promoting public health initiatives and improving the well-being of communities across Pakistan, combines quantitative analysis and qualitative insights gathered from a sample of 1,698 smokers out of a total sample size of 2,000 individuals, along with a survey of 60 retailer shops in cities including Mardan, Hyderabad, Multan, Faisalabad, Sahiwal & Gujranwala.

The study disclosed that the 154% increase in federal excise duty on cigarettes to put out these of reach of consumers has failed to produce results. Higher taxes have increased the tendency to switch from expensive brands to readily available cheaper alternatives, which is the opposite of the government’s intentions.

Around 87% of retailers confirmed increased demand for cheaper, non-tax-paid cigarettes due to the price increase. 83.5% reported the absence of tax stamps on cigarette packs, indicating widespread tax evasion.

The FED increase has caused variations in the price distribution of cigarette brands, leading the majority of respondents to opt for cheaper tax-evaded illicit cigarette brands, 62.4% of respondents reported using brands priced between 80 and 120 rupees.

“The findings are a wake-up call for policymakers,” said Muzammil Sheikh, Chief Executive Officer of Umeed-e-Sehar. “While well-intentioned, the price hike has inadvertently fueled the growth of the illicit cigarette trade, undermining both public health goals and government revenue.”

“Tackling the illicit cigarette trade is crucial for realizing the potential revenue from the tobacco sector and safeguarding public health. Failure to act will only perpetuate this vicious cycle, jeopardizing the well-being of our nation,” he added.

“Efforts to reduce smoking should be coupled with combating illicit trade, as strengthening enforcement can lead to a healthier, tobacco-free society in Pakistan” he added.

 

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