This brief examines the impact of tax reduction policies on tobacco consumption and revenue mobilization in Pakistan. Pakistan’s experiment with a three‑tier cigarette tax structure in 2017, which reduced rates for low‑price brands by nearly 48%, led to a sharp 22% fall in retail prices and a surge in domestic production from 34.3 billion to 59.1 billion sticks within a year. Contrary to expectations, this policy failed to boost revenues and instead fueled consumption. The Budget 2019–20 reversed course, restoring a two‑tier system and raising rates across tiers. Evidence shows that higher prices can cut cigarette use by 9–18%, improving public health while strengthening fiscal outcomes.
