ISLAMABAD: In a pre-budget media briefing, Asad Shah, Director of the Pakistan Tobacco Company (PTC), raised serious concerns over the growing dominance of illicit cigarette trade in Pakistan, which he described as the “current market leader” in the industry.
Shah revealed that illicit cigarettes now account for 58% of the market share, while the total annual volume of the cigarette industry stands at approximately 82 billion sticks. He noted that while the sector has the potential to contribute PKR 570 billion annually in tax revenue, only PKR 292 billion was collected in FY 2023–24, and just PKR 223 billion has been collected in the first 11 months of the current fiscal year.
“It is impossible to recover the remaining PKR 50 billion in just one month,” Shah stated, citing widespread tax evasion and alleging that some non-governmental organizations were pushing specific agendas that hinder enforcement efforts.
He highlighted that a decade ago, taxes were collected on 67 billion cigarette sticks, whereas today, that figure has dropped to just 34 billion. Shah blamed the 2023 tax policy for exacerbating the issue, marking the second significant revenue decline from the tobacco sector in a decade.
Despite holding only 42% of the market, the legal cigarette sector contributes 98% of the total tax revenue, Shah pointed out.
He called for strict enforcement of documentation and regulatory policies across the entire sector. The government’s minimum legal retail price for a cigarette pack is PKR 162.25, yet 18 billion sticks are reportedly being sold at or below PKR 150, evading taxes. “To date, no entity has been penalized for violating the minimum price rule,” he added.
To combat the perception of cigarettes being cheap in Pakistan, Shah recommended increasing the minimum price and ensuring consistent implementation of tax regulations. “No policy can succeed without non-discriminatory enforcement,” he said, highlighting that locally manufactured cigarettes without tax stamps are openly available in markets.
Shah criticized the ineffective implementation of the track-and-trace tax stamp policy, arguing that unless applied uniformly, it fails to curb tax evasion. He suggested reducing the adjustable tax on acetate tow, a key filter material, from PKR 44,000 per kg to PKR 4,000 per kg to curb its smuggling. Authorities have already seized 450 metric tons of smuggled acetate tow this year, he added.
He also proposed imposing adjustable tax on cigarette paper to ensure comprehensive documentation and discourage evasion throughout the supply chain.
