Proposed Health Tax on Ultra-Processed Foods and Beverages, Federal Excise Duty Increase 2025–26

The policy seeks to discourage consumption of ultra-processed foods (UPFs) and sugar-sweetened beverages by increasing the federal excise duty (FED) for products exceeding certain nutrient thresholds (e.g. high in free sugars, sodium, saturated fats). It aims to reduce the consumption of UPFs and lower the risk of non-communicable disease (NCDs), which will lead to lower medical costs and earn more from increased years of productive life. This will have a significant impact on the national economy. The method is via amendments in the national budget and the excise duty regime.

Pakistan is facing a growing burden of noncommunicable diseases, including obesity, diabetes, and cardiovascular conditions, largely driven by diets high in processed and ultra-processed foods and sugary beverages. To address this, the Ministry of Health proposed a targeted excise tax on these products in the 2025–26 federal budget, aiming both to discourage unhealthy consumption and generate revenue for preventive health programs and healthcare infrastructure. The report suggests raising the Federal Excise Duty (FED) on items already subject to a 20% rate to 40% in the 2025-26 budget, with the tax rate potentially rising to 50% by 2028-29. Key collaborators include the Ministry of Finance, overseeing integration into the fiscal system, and the Federal Board of Revenue, responsible for enforcement and compliance monitoring. The policy aligns with Pakistan’s broader national health strategy and global commitments, including WHO recommendations and SDG 3.4 on reducing premature mortality from NCDs. Evidence from other countries suggests that such fiscal measures can reduce consumption, encourage industry reformulation, and provide sustainable funding for public health initiatives. The tax is also expected to complement labelling, marketing restrictions, and public awareness campaigns to improve population health outcomes.

It is owned by the Ministry of Health (policy design), Ministry of Finance & Federal Board of Revenue (tax implementation) Track revenue from the tax monitor market prices and consumption trends, and compliance oversight is monitored by revenue/tax agencies

If approved, the tax would be included in the fiscal budget and applied through excise duty mechanisms. Over time, the scope could expand or rates adjusted. Implementation and Results (Projected) Because it is not yet active, there are no empirical results. However, modelling and international precedent suggest that a 20 % tax on unhealthy foods and drinks could reduce consumption, shift industry practices (product reformulation), and increase health sector funding. Possible challenges include resistance from industry, enforcement, especially for imports/digital sales, and ensuring nutritious alternatives remain affordable.

https://www.foodbusinessafrica.com/pakistan-proposes-20-health-tax-on-ultra-processed-foods-beverages-in-fy2025-26-budget/