Tobacco industry to be benefited by the abolition of the third tier from the cigarette tax

Civil society and consumers’ rights groups expressed extreme distress over the health ministry’s compromise on health tax in regard to abolishing the third tier from cigarettes tax. They are upset as all their efforts have gone in vain and the system is back to where it was three years ago in 2016.

However, this decision in the federal budget might turn out to be beneficial for the tobacco industry as, after removal of 3rd tier that was introduced in 2017-18,  prices of cigarettes in the upper tier have been increased from Rs. 90 to Rs.104 per pack of 20 cigarettes which are consumed on a much lower level and 2nd tier which is a highly consumed product, after the removal of 3rd tier its price has been adjusted to Rs. 33.

When the 3rd tier was introduced in 2107-18, almost 80% of maximum sold brands fell under 3rd tier and their prices had to be reduced by almost 50% and average FED ratio saw a sharp decline from 57.5% to less than 45% leading the government to remove 3rd tier cigarette tax in the latest budget.

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