Pakistan has lost over Rs567 billion in revenue over the past decade due to tobacco smuggling and illegal cigarette manufacturing, a high-level meeting revealed. Co-chaired by Federal Minister of State Ali Pervez Malik and KP Adviser Muzammil Aslam, the meeting addressed the economic and health impacts of the illicit trade and outlined a strategy to counter it.
Attendees included the KP excise minister, representatives from the Federal Board of Revenue (FBR), the Pakistan Tobacco Board, and tobacco companies. Discussions covered the economic and health impacts of illegal cigarette trade, emphasizing the urgent need for coordinated action.
Key agreements were reached to enhance monitoring and enforcement. These include improving the estimation process to curb illicit tobacco cultivation, implementing more robust track-and-trace mechanisms for tobacco products, and fostering data sharing between federal and provincial governments to strengthen surveillance of cigarette exports.
The KP finance adviser noted that the province’s excise duty on tobacco is designated to support health services. He urged manufacturers to withdraw legal challenges and engage in dialogue for a resolution. A special technical committee was formed to develop a comprehensive action plan to implement the meeting’s decisions.
Data shows that the illicit cigarette trade accounts for approximately 33% of the market, with smuggled brands comprising 12%. Despite FBR’s introduction of a Track and Trace System (TTS), which covers 55% of cigarette packs, the trade persists, particularly in rural areas where compliance is lower.
From July to November 2023, the legitimate tobacco industry’s output fell by 40%, attributed to the rise of untaxed cigarettes. The government has also faced tax revenue losses as new, unregulated brands emerged following an increase in the Federal Excise Duty (FED). Within two months of the hike, over 70 new brands offered cheaper alternatives to consumers.
The FBR plans to expand the TTS to all cigarette manufacturing units and penalize retailers selling unstamped products. Strengthening enforcement, expanding tracking systems, and raising public awareness are deemed essential to combat smuggling, recover lost revenue, and protect public health.
