As a result of Pakistan’s recent implementation of the Rs. 170 billion mini-budget, which increased the sales tax rate from 17% to 18% and raised the Federal Excise Duty (FED) on cigarettes by 150%, cigarette manufacturers have announced a significant price hike of 250% per packet of tabacco.
This has affected all major brands, with prices ranging from Rs. 211 to Rs. 522-525 per packet. Even Marlboro Lights Pakistan now retails for Rs. 500 per pack after a price revision that increased the price by Rs. 240 per packet.
A spokesperson for Philip Morris Pakistan Limited expressed concern that this unprecedented tax hike will benefit illicit cigarette manufacturers in the country and lead to significant shortfalls in government revenue, as many consumers will shift to the non-tax-paid sector.
The proposed tax hike on tobacco companies, which is unprecedented, is likely to benefit the illicit cigarette manufacturers in Pakistan who already have a large market share. This could lead to a significant reduction in government revenue, as many consumers may switch to the non-tax-paid sector, as has been observed in the past. In addition, the Federal Excise Duty (FED) on cigarettes has already increased by around 26% between 2019 and 2021, and by around 25% in the current fiscal year 2022-23. The latest announcement of a more than 150% increase in FED on cigarettes will result in a price increase of over 250% for adult consumers compared to the first quarter of 2022.
Prices of local tobacco brands associated with Pakistan Tobacco Company Limited (PSX: PAKT) have increased due to excise-led price hikes. As a result, a pack of 20 Dunhill Switch cigarettes now costs Rs. 522.3, and retailers are selling it for Rs. 525-530 per pack.
Similarly, Dunhill Lights and Gold Leaf, which are popular local brands, now cost Rs. 479 and Rs. 483 per pack, respectively. The Embassy, which is often preferred by the hard-working labor segment of the country, now costs Rs. 212 per packet.
The following is the complete list of PAKT rates that have been announced effective from February 18th, 2023:
|Brand||Outer Rate (Rupees)||Packet Rate (Rupees)|
|Dunhill 20HL, Switch||5222.91||522.29|
|Dunhill Lights, 20HL||4787.93||478.79|
|Benson & Hedges 20HL||4799.31||479.93|
|Bensen & Hedges Lights||4799.31||479.93|
|Gold Leaf 20HL||4826.47||482.65|
|Gold Leaf SPL, 20HL||4793.86||479.39|
|Capstan FT 20HL||2107.59||210.76|
|Capstan by Pall Mall Original 20HL||2117.37||211.74|
|Gold Flake KS FT 20HL||2117.37||211.74|
|Gold Flake KS FT 20SC||2117.37||211.74|
|Embassy FT 20SS||2117.37||211.74|
Finance Minister Ishaq Dar introduced a supplementary finance bill in parliament, which includes an increase in the sales tax on cigarettes. It’s worth noting that the Federal Board of Revenue (FBR) announced a 153% increase in the Federal Excise Duty (FED) for expensive cigarette brands, raising the price per cigarette from Rs. 6.5 to Rs. 16.5. For less expensive brands, the increase is about 100% per stick, with the price going up from Rs. 2.55 to Rs. 5.1. This announcement was made by the FBR on Tuesday.
Experts claim that the recent increase in Federal Excise Duty (FED) is harmful to legal tobacco companies as their sales are decreasing. However, it is evident that despite the large and expectedly stringent taxes imposed by the mini-budget, the tobacco industry has raised prices beyond what was necessary to cover the tax changes.
The industry has increased the price differentials per packet by significantly raising consumer rates above the cost of the tax increase on expensive products while absorbing the tax impact on cheaper products.