A well-orchestrated campaign advocating for reduced cigarette taxes has recently gained momentum, primarily driven by the cigarette industry.

Their arguments crystallize into three core assertions: First, they contend that the prevailing tax structure is crippling large-scale manufacturing, including cigarette manufacturing sector, as evidenced by the 1.9% contraction in the Quantum Index of Manufacturing (QIM) reported by the Pakistan Bureau of Statistics.

Second, they allege that elevated cigarette taxes have precipitated an alarming surge in the illicit cigarette trade, severely eroding the legitimate market. The recent claim is that the illicit cigarette trade has reached 54%.

Third, they point to the half-yearly tax collection data, which reveals a concerning decline: a 2.4% drop in Federal Excise Duty (FED) and a substantial 26.1% decrease in Sales Tax, suggesting a failure of higher taxes to generate increased revenue. They posit that a proposed 25% reduction in cigarette taxes would narrow the price differential between licit and illicit products, likely encouraging illicit cigarette users to switch to licit cigarettes, thereby boosting overall tax revenue. Let us rigorously examine these claims within the economic context of half-yearly production and tax collection figures.

First, it is vital to accept that cigarettes are a demonstrably harmful product. Therefore, advocating for their production on macroeconomic grounds is not only economically misguided but directly conflicts with the public health priorities of the country and its commitment to the Framework Convention on Tobacco Control (FCTC) and the Sustainable Development Goals (SDGs).

Also, the attempt to link the cigarette industry’s performance to the overall decline in large-scale manufacturing is fundamentally flawed.

The QIM contraction is primarily driven by substantial downturns in construction and infrastructure-related sectors – specifically, non-metallic minerals, iron and steel, and fabricated metal – which have been impacted by economic policies and broader economic........

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