World Bank Urges Higher Excise Duty on Cigarettes to Improve Tax Revenue

The World Bank (WB) has strongly recommended higher rates of the federal excise duty (FED) on cigarettes. The World Bank’s latest report ‘Pakistan Development Update’ said that a substantial revenue gain of 0.4 percent of GDP could be achieved if the current rate on premium cigarettes (Rs. 16.50 per cigarette) was also applied to standard cigarettes. The report said that the federal excise duty collection on cigarettes lies below its potential Pakistan collected 0.5 percent of GDP in federal excise duty revenue in FY21. The taxation of cigarettes was the main contributor to this and accounted for 0.19 percent of GDP, which has remained relatively steady in recent years. Cigarettes are taxed through a dual rate. A substantial revenue gain of 0.4 percent of GDP could be achieved if the current rate on premium cigarettes (Rs. 16.50 per cigarette) was also applied to standard cigarettes.