Background Despite ongoing global efforts for tobacco control, low-income countries with struggling economies have challenges to effectively implement tobacco policies and programs. Due to the complexity of the tobacco control issue and lack of comprehensive policies, tobacco use is increasing in Pakistan.

Objective The aim of this study was to assess the effect of taxes on tobacco demand in Pakistan.

Methods Various surveillance indicators of tobacco use were assessed from 2001 to 2009. Price elasticities of cigarette demand in Pakistan were investigated.

Results During 2003–2009, annual per capita cigarette consumption increased by 30%. Analysis of economic data indicated that a 10% increase in cigarette prices would lead to 4.8% decrease in cigarette consumption while controlling for per capita income in the short term. The long-term price elasticities of cigarette demand were estimated at −1.17. The estimations provided support for myopic addiction model for cigarette consumption in Pakistan.

Conclusions Increasing tobacco taxes would have a significant impact on tobacco consumption in Pakistan. Cigarette consumption could decrease by 11.7% in the long term if there was a 10% increase in its price. The results of this study should benefit policymakers as it provides information on the characteristics of the cigarette consumption and cigarette demand function that may help in planning tobacco control strategies in low-income and middle-income countries.