The Federal Board of Revenue (FBR) has collected Rs240 billion from the tobacco industry during the July-May period of fiscal year 2024-25, with expectations to exceed Rs285 billion by the end of June 2025.
According to a news report, the growing tax collection figures contradict proposals from the tobacco industry that seek reductions in tobacco taxes. The industry’s tax reduction requests, aimed at decreasing the Federal Excise Duty (FED) from Rs5,050 to Rs3,800 per 1,000 sticks, argue that lower taxes would boost consumption and, consequently, tax revenue.Â
However, the current data points to stable demand despite high taxes, as the anticipated Rs285 billion revenue aligns closely with figures from the previous fiscal year.
The increase in tobacco tax revenue raises questions about the industry’s push for lower taxes, suggesting that it may be manipulating figures to influence policy decisions.Â
Sources claim that the industry is distorting facts in an attempt to sway government policy, particularly in negotiations with the International Monetary Fund (IMF) ahead of the 2025-26 federal budget.
A report by the Institute for Public Opinion Research (IPOR) recently claimed that 54% of cigarette sales were from illicit brands, citing non-compliance with tax stamps and graphic warnings. However, these findings have been criticised for not accurately reflecting the actual market share or consumption of these illicit brands.
Further analysis by the Social Policy and Development Centre (SPDC) showed that 80% of the market share belongs to the top 15 cigarette brands, 13 of which are registered with the FBR. Illicit trade, including both smuggled and locally manufactured cigarettes, accounts for approximately 33.2% of total consumption, much lower than the 50% or more often cited by the industry.
While the tobacco industry has suggested that lowering taxes would help reduce illicit trade and improve revenue collection, available data indicates otherwise. Reducing taxes could lead to lower prices, potentially increasing consumption, but not necessarily resulting in higher tax revenue, experts warn.
