Illegal cigarette market in Pakistan: Govt urged to prioritise anti-smuggling measures

Business Recorder

2 days ago

KARACHI: Fawad Khan, spokesperson for Mustehkam Pakistan, has emphasised that 'Illicit trade is draining the country's resources and undermining its ability to function effectively. We hope the World Health Organization considers that further tax increases could unintentionally encourage the illegal cigarette market in Pakistan.'
He further stated that while legal cigarette manufacturers contribute nearly all of the sector's tax revenue, they face growing pressure from untaxed and illicit products, many of which do not carry mandatory health warnings.
'Unless enforcement is strengthened, additional tax hikes may prove counterproductive by driving more consumers toward illicit brands,' he warned.
Instead of focusing solely on tax increases, Pakistan must prioritise anti-illicit trade enforcement, as higher taxes without strong implementation may shift more consumers toward illegal products rather than reducing tobacco use.
Current data revealed that the compliant tobacco sector generates nearly 98% of total tobacco tax revenue, yet holds just 46% of the market share. Meanwhile, untaxed and illegal products now account for over half of the market, resulting in an estimated annual loss of Rs 415 billion to the national exchequer.
While the World Health Organization (WHO) continues to advocate for higher tobacco taxation as part of its efforts to reduce smoking, experts cautioned that ignoring the rampant illicit trade could undermine both public health objectives and revenue gains. If not addressed, further tax hikes may inadvertently fuel the black market for cigarettes.
Fawad Khan emphasised that policy momentum must now be translated into action, including the implementation of a robust Track & Trace system, closing legal loopholes, and enhancing coordination among the FBR, Customs, and law enforcement agencies. He noted that similar digital monitoring mechanisms in the sugar and cement sectors have significantly improved revenue collection and could yield similar results in the tobacco sector.
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