BACKGROUND: Excise tax rates on cigarettes are relatively low in Pakistan, with an average of 60% of the retail price. It is often argued by the tobacco industry that high taxes will not lead to lower consumption due to the addictive nature of cigarette consumption. In February 2023, the government enhanced the excise tax rates on cigarettes by around 150%, resulting in a corresponding increase in cigarette prices. This research aimed to assess the impact of the cigarette tax increase on the consumption patterns of smokers.
METHODS: A nationwide survey of over 5000 smokers was conducted to collect information on smoking practices, including socioeconomic characteristics, brand used, purchasing habits, price, smoking intensity, etc. In particular, smokers were asked about their response to the cigarette price increase in February 2023. Some comparisons, where applicable, were also made with a similar survey that was conducted in 2021-22.
RESULTS: The survey results reveal that 26.3% of smokers cut down on their cigarette consumption due to the price increase. After accounting for the variation in smoking intensity of respondents, the decline in aggregated consumption of respondents was estimated to be 19.2%. The reduction was more substantial among lower-income groups. Compared to the 2021-22 Survey, there has been a notable shift toward economy brands. The market share of high-priced brands dropped from 20.3% in 2021-22 to 6.6% in 2023-24.
CONCLUSIONS: The study provides strong evidence against the tobacco industry’s claims about the ineffectiveness of taxation in reducing cigarette consumption and highlights its potential to achieve tobacco control policy objectives. The large price variation caused by tax rate differentials allows smokers to opt for cheaper brands rather than quitting. The study underscores the need for a uniform tax structure, which is also relevant for other countries, like Bangladesh and Indonesia, with a tiered tax system and large price variations.