Tax Law Ordinance 2022: A Long-awaited Excise Tax Increase on Cigarettes

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Following the tax measures introduced in the Finance Act 2022 on June 30, 2022, the Government of Pakistan promulgated Tax Law (Amendment) Ordinance 2022 on August 23, 2022, to generate additional revenue from various sectors of the economy, including the tobacco sector. Under the Finance Act 2022, the average rate of Federal Excise Duty (FED) on cigarettes was increased by 12.5 percent, which was further enhanced, resulting in an overall increase of 24.5 percent. This is a commendable policy measure which is anticipated to have positive implications in terms of reducing cigarette consumption and improving public health. This fact sheet provides key messages from analysis conducted by SPDC on the revenue and health impacts of the tax rate increase. Comparison is made between the tax rate applicable in 2021-22 (before the Finance Act 2022) and the most recent change.