Macroeconomic Impacts of Tobacco Taxation in Pakistan

The University of Illinois at Chicago’s (UIC) Institute for Health Research and Policy is funding a group of economists to develop evidence-based policy support for effective tobacco tax policies in low- and middle-income countries with the highest rates of tobacco consumption. The global collaboration on the economics of tobacco is facilitated through Tobacconomics, a web-based platform. UIC is a partner of the Bloomberg Initiative to Reduce Tobacco Use.

The Social Policy and Development Centre (SPDC) is funded by the UIC Institute for Health Research and Policy to conduct economic research on tobacco taxation in Pakistan. Objective of this project is to conduct and disseminate research on macroeconomic impacts of tobacco taxation in Pakistan. The research covers a variety of aspects related to tobacco taxation in Pakistan.


1. Macroeconomic Impacts of Tobacco Use in Pakistan – Research Report 

Objective of this research is to analyze the macroeconomic impacts of tobacco use in Pakistan. The study estimates the changes in output, income and employment resulting from changes in tobacco use and quantifies the impact of such changes on other economic sectors. It also reviews the existing tax structure, tax rates and tax administration mechanisms with regard to tobacco taxation in Pakistan and proposes policy recommendations on tax structure and administration reforms.

2. Quantifying the potential tax base of cigarette industry in Pakistan – Research Report

The study aims to quantify the extent of tax evasion in the cigarette industry through measurement of the extent of under-reporting of cigarette production in Pakistan. The study is primarily based on quantitative methods and relies mainly on secondary sources of data, particularly the data on the industry-level linkages between input and output.

3. Quantifying the potential tax base of cigarette industry in Pakistan – Research Report

The overall objective of the study is to estimate the potential levels of output by the cigarette industry to measure the extent of tax evasion on the domestic production of cigarettes in Pakistan. 

4. The Impact of tobacco use on household consumption patterns in Pakistan – Research Report

This study is the first attempt to estimate the impact of tobacco use on consumption patterns of households in Pakistan and complements existing work on the crowding out effect of tobacco expenditures in developing economies.



  1. Tobacco control in Pakistan: the impact of tax reduction policy – Policy Brief 
  2. Role of tobacco in Pakistan’s economy: an untold reality – Policy Brief
  3. Enhanced tobacco taxation in Pakistan is likely to reduce cigarette consumption and even generate more revenue – Policy Brief 
  4. Untapped tax potential of cigarette industry in Pakistan – Policy Brief 
  5. Tobacco expenditure leads to reduced spending on basic needs among poor households – Policy Brief 

On-going research

  1. Macroeconomic impacts of tobacco taxation: The research will unpack the macroeconomic impacts of tobacco taxation by infusing effective and statutory tobacco tax rates in a general equilibrium framework. The study will estimate the direct impact of tobacco taxation on government revenues, household tobacco consumption, employment and investment in the tobacco industry. It will also examine the ripple effects of tobacco taxation by analyzing household consumption of other commodities, sector-wise employment and investment patterns.
  2. The impact of tobacco expenditure on household consumption patterns in Pakistan: Focusing on the microeconomic impact of tobacco use, the study will analyze the impact of tobacco expenditure on the consumption pattern of households. Specifically, if tobacco expenditure crowds out expenditure on other commodity groups and whether the level of crowding out varies by income.
  3. Consumption behavior of smokers: The study will examine the consumption behavior of the cigarette consumers in relation to changes in prices, particularly due to changes in tax policy. Specifically, the study will estimate consumption at several points in time, past and present.