Pakistan has the world’s highest sales tax on packaged milk, tea whitener, and powdered milk at 18%. The tax has raised packaged milk prices to Rs350 per liter, a 28% increase, crushing the business and cutting sales.
The Pakistan Dairy Association (PDA) urged Finance Minister Muhammad Aurangzeb to lower the tax to 5% to match global standards. In a population where 40% of children are stunted and 54% of women are anemic, the industry is crucial. A surprising 64% of packaged milk consumers earn under Rs50,000 a month, dispelling the myth that only the wealthy buy it.
Milk taxes worldwide either missing or much lower than Pakistan’s. India has no milk tax, but Germany and the UK charge 7% and 9%. The levy caused a 20% sales drop and the closure of 500 milk collection stations, diverting 35% of official farmers to the informal milk market, according to the PDA.
This reduction has cost many jobs, lowered industry capacity, and reduced safe, packaged milk availability. A survey found that 45% of loose milk in the country is dangerous, highlighting the public health hazards of uncontrolled options.
The tax was supposed to raise Rs50 billion, but the sector’s decline shows it won’t. The finance minister acknowledged these issues and committed to review tax policies to support this vital industry.
