Pakistan’s Federal Budget 2026-27 left cigarette excise duty rates unchanged while increasing the federal excise duty on e-liquids for electronic cigarettes from Rs10,000 to Rs16,500 ($36 to $59.40) per kg and reducing the duty on acetate tow, a key cigarette filter input, from Rs44,000 ($158.40) to Rs10,000 per kg. In an analysis of the budget, the Sustainable Development Policy Institute said the combination of stronger enforcement measures, unchanged cigarette taxes, and lower duties on cigarette manufacturing inputs raises questions about the overall coherence of the country’s tobacco tax policy.
The institute also noted that cigarette excise rates have remained unchanged since February 2023, reducing their real value in an inflationary environment, while the government chose not to introduce a proposed third tier of cigarette excise taxation. Looking ahead, the analysis recommends periodic reviews of cigarette excise rates, reassessing tax treatment of manufacturing inputs, refining the taxation of e-liquids to better reflect market practices, and exploring environmental levies on tobacco products as part of a more integrated fiscal strategy.
