The Pakistan Tobacco Company (PTC) warned on Wednesday that the illicit cigarette trade now accounts for more than half of the country’s tobacco market, severely undermining tax revenues and regulatory efforts.
Speaking at a pre-budget media briefing, PTC Director Asad Shah said illegal cigarette brands have captured 58 per cent of the market, making them the dominant players in the industry. The total market size stands at about 82 billion cigarette sticks annually, he said.
Shah said the government is losing significant revenue due to widespread tax evasion. “The sector could generate Rs570 billion annually, but only Rs292 billion was collected in fiscal year 2023–24,” he said. “In the first 11 months of the current year, just Rs223 billion has been recovered.”
He said recovering the remaining Rs50 billion in the final month of the fiscal year was “impossible” and blamed the situation on weak enforcement and the influence of certain non-governmental organisations “pushing specific agendas.”
A decade ago, taxes were collected on 67 billion cigarette sticks, but that number has dropped to 34 billion, Shah said. He blamed the 2023 tax policy for worsening the issue, calling it the second major revenue loss in 10 years.
Although legal tobacco companies hold just 42 per cent of the market, they contribute 98 per cent of tobacco tax revenue, he said.
Shah urged the government to tighten enforcement of existing rules, including the legal minimum retail price of Rs162.25 per cigarette pack. He said 18 billion sticks are being sold at or below Rs150, avoiding tax, and no penalties have been imposed on violators so far.
He proposed raising the minimum price to counter the perception that cigarettes are cheap in Pakistan and called for uniform enforcement of tax laws. “No policy can work without fair and equal implementation,” he said, pointing out that locally manufactured cigarettes without tax stamps are still being openly sold.
Shah also criticised the uneven application of the government’s track-and-trace tax stamp system, saying its patchy rollout limits its effectiveness in tackling evasion.
He recommended cutting the adjustable tax on acetate tow. used in cigarette filters, from Rs44,000 per kilogram to Rs4,000 per kilogram to discourage smuggling. Authorities have already seized 450 metric tons of smuggled acetate tow this year, he noted.
Shah further suggested introducing adjustable tax on cigarette paper to ensure full documentation across the supply chain.
