Illicit cigarette trade costs Pakistan Rs415b

Weak enforcement, delayed tracking system blamed for losses

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LAHORE:

Pakistan continues to suffer massive tax losses due to the unchecked rise of the illicit cigarette trade, with the country losing around Rs415 billion annually as enforcement measures fail to keep pace with the illegal market's expansion.

While commitments have been made to address the issue, enforcement actions on the ground including the track & trace system have not matched the scale of the illicit trade. This gap is enabling illegal operators to grow freely, undermining the formal sector and depriving the national exchequer of much-needed revenue.

"The government needs to take concrete measures to curb the continuous growth in the illicit sector, which is not only hurting the national economy but is thriving due to weak enforcement," said Fawad Khan, Spokesperson for Mustehkam Pakistan.

The Institute for Public Opinion Research (IPOR) reported that around 54% of cigarette brands sold in Pakistan are illicit. Despite contributing 98% of the tobacco industry's total tax revenue, the legal sector now holds just 46% of the market share and contributes around Rs270 billion in taxes.

This results in a direct loss of nearly Rs415 billion annually in unpaid taxes and duties. If the illicit sector continues to grow, the legal sector may shrink further, putting the existing Rs270 billion at risk.

"With illicit cigarette sales on the rise, law enforcement agencies and policymakers must take urgent action to combat smuggling and unregistered production," Khan said. "Until enforcement measures are effectively implemented, the national treasury will continue to bleed while non-compliant players operate with impunity. Pakistan has done a great job in restricting INGOs like CTFK and Vital Strategies who, with their partners in Pakistan, were actively fiddling with policymaking and operating against the laws."