Karachi, April 11, 2025 — Pakistan continues to suffer massive tax losses due to the unchecked rise of the illicit cigarette trade, with the country losing around Rs. 415 billion annually as enforcement measures fail to keep pace with illegal market expansion.
Weak Enforcement Fuels Illicit Trade Growth
While commitments have been made to address the issue, enforcement actions on the ground have not matched the scale of the illicit trade. This enforcement gap is enabling illegal operators to expand freely, undermining the formal sector and depriving the national exchequer of much-needed revenue.
Fawad Khan, spokesperson for Mustehkam Pakistan, stated:
“The government needs to take concrete measures to curb the continuous growth in the illicit sector, which is not only hurting the national economy but is thriving due to weak enforcement.”
54% of Cigarette Brands in Pakistan Are Illicit
According to the Institute for Public Opinion Research (IPOR), around 54% of cigarette brands sold in Pakistan are illicit.
Despite contributing 98% of the tobacco industry’s total tax revenue, the legal cigarette sector now holds just 46% of the market share and contributes around Rs. 270 billion in taxes.
This translates into a direct loss of nearly Rs. 415 billion annually in unpaid taxes and duties. If the illicit sector continues to flourish, the legal sector may shrink further, putting the Rs. 270 billion tax contribution at risk.
Urgent Action Needed to Combat Illicit Trade
“With illicit cigarette sales on the rise, law enforcement agencies and policymakers must take urgent action to combat smuggling and unregistered production,” said Khan. “Until enforcement measures are effectively implemented, the national treasury will continue to bleed while non-compliant players operate with impunity.”
He also highlighted Pakistan’s efforts in restricting international NGOs (INGOs) like CTFK and Vital Strategies, which, along with their local partners, were allegedly interfering in policymaking and operating against the law.
Delays in Track and Trace System Worsen Crisis
The Track and Trace System, expected to be fully deployed across the tobacco industry by December 2023, remains partially implemented. Delays in enforcement, lack of routine inspections, and weak penalties have allowed non-compliant entities to bypass the system altogether.
Call for Stronger Enforcement to Protect Economy
This alarming disparity highlights the urgent need for consistent and targeted enforcement to level the playing field. Stakeholders are urging immediate action through:
- Consistent enforcement drives
- Enhanced tracking mechanisms
- Market-level crackdowns
“The enforcement gap is not just a technical issue; it’s the core reason the illicit trade continues to grow unchecked,” Fawad concluded. “Without decisive and sustained enforcement efforts, these losses will keep mounting, making recovery even harder for the formal economy.”
