Over Rs300b lost annually to illicit cigarette trade
Listen to article
In a recent episode of The Express Tribune Podcast, in collaboration with #BehtareenPakistan, experts warned that Pakistan loses more than Rs300 billion annually due to the unchecked trade of illicit cigarettes.
The conversation highlighted how tax evasion, weak enforcement of the Track and Trace system, and regulatory loopholes are crippling both public revenue and health safeguards.
Speaking on the podcast, CEO of the Institute for Public Opinion Research (IPOR), Junaid Iqbal, said, 'This is not just a health issue—it's an economic crisis.
When more than 40% of the cigarette market goes untaxed, the state loses the ability to fund vital services. Smugglers are filling the gap while legitimate businesses suffer.'
Panelists revealed that illegal cigarette manufacturers are exploiting the system by avoiding the Federal Excise Duty and producing below the legal price threshold.
These untaxed products are then sold cheaply, undercutting lawful manufacturers and contributing to a shadow economy that thrives on regulatory inaction.
The podcast also explored the broader impacts of the illicit trade. Experts emphasised that this is not simply a revenue issue—it also has dire implications for public health. Consumers of illegal cigarettes are often exposed to unregulated, potentially more harmful products.
In response to these challenges, the panel advocated for the urgent implementation of a fully functional track-and-trace system to digitally monitor cigarette production and distribution. They also called for tougher penalties for violators and more transparent oversight by tax authorities.
Iqbal stressed, 'There needs to be a serious political will to act. The solution is not just about enforcement—it's about protecting Pakistan's economy from systemic exploitation.'
The podcast concluded with a consensus that only a coordinated approach—combining technology, regulation, and awareness—can dismantle the illegal trade and reclaim lost revenue for the nation.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Recorder
2 days ago
- Business Recorder
Finance Bill 2025 nearly done: Rs200bn new tax measures of GST, FED expected
ISLAMABAD: The Federal Board of Revenue (FBR) has almost finalized Finance Bill (2025-26) and expected to announce new taxation measures of nearly Rs 200 billion of sales tax and Federal Excise Duty (FED) in the fiscal budget (2025-26). Sources told Business Recorder that the working on the new Finance Bill has been given final touches on Thursday. The revenue generation measures may include 18 percent sales tax on the import of solar panels. Unregistered taxpayers: 4pc 'further sales tax' to be abolished Among other proposals, 18 percent sales tax would be imposed on e-commerce. The FBR has finalized items which would be deleted from the Sixth Schedule (Exemption Schedule) and Eighth Schedule-lower rate of sales tax of the Sales Tax Act. The government my increase sales tax rate on a large number of items subjected to lower rate of sales tax or concessionary sales tax rates in coming budget (2025-26). In this regard, the FBR is compiling a list of items on which sales tax rate would be increased. However, some cancer related medical equipment and lifesaving drugs would be added in the sales tax exemption schedule of the Sales Tax Act. According to sources, the FBR may expand the scope of sales tax on services within the territorial jurisdiction of federal capital in budget (2025-26). The FBR has also decided to impose 18 percent sales tax on goods manufactured in erstwhile tribal areas in the federal budget (2025-26). The scope of the Third Schedule would be expanded to include more items for charging sales tax on the basis of printed retail price. The imported chocolates, coffee and imported cereals would be included in the Third Schedule of the Sales Tax Act. Sources added that the FBR may impose 5 percent FED on a wide range of ultra-processed foods covering frozen foods, chips, carbonated drinks, instant noodles, ice cream, biscuits, frozen meat, sauces, ready-made meals, sausages and many other kinds of ultra-processed foods. Copyright Business Recorder, 2025
Business Recorder
2 days ago
- Business Recorder
Hoping against hope for a ‘bold budget'
EDITORIAL: The finance minister, Mohammad Aurangzeb, is describing the upcoming budget as a 'bold budget.' However, the FBR (Federal Board of Revenue) is attempting to impose regressive and lazy taxes through the backdoor measures that can be called anything but certainly not bold. The tax machinery remains fixated on extracting revenue without broadening the tax base, and in doing so it is, in fact, strangling the formal economy. A glaring example is the government's last-minute attempt to impose a Capital Value Tax (CVT) on movable assets such as cash and gold — a move rightly objected to by the IMF (International Monetary Fund). The government's mindset appears to be to offer relief through populist measures, while making up the revenue shortfall with ad hoc, irrational proposals. There remains no considerable effort to expand the tax base or bring the under-taxed and untaxed segments into the net. Simultaneously, the government is proposing to increase the withholding tax (WHT) rate on income from bank deposits and investments in mutual funds — while also attempting to apply CVT on cash. Such steps will only push the economy further into informality, encouraging people to withdraw funds from the banking system and divert savings into gold, foreign currency, or even hide the money under their mattresses. Pakistan's tax system is already highly regressive, with one of the highest sales tax rates and widespread application of Federal Excise Duty (FED) and WHT (Withholding Tax) across transactions of various goods and services running in parallel with sales tax and federal excise duty in VAT mode. A sizeable portion of income tax is collected at the import stage. Now, the proposal for a wealth tax adds another layer of burden, not reform, but regression. Previously, the government imposed CVT on foreign assets, including those declared under the amnesty scheme — despite the explicit promise that, upon paying the specified tax, wealth would be accepted as legitimate. The government later backtracked on this commitment, and the CVT, therefore, is now being challenged in court. Those who declared their wealth feel betrayed, while those who did not are reaping the benefits. Now, even those who have fully declared and paid taxes on their assets are being pushed toward informality. The kind of taxes FBR is proposing will only deepen the grey areas of the economy. Needless to say, Pakistan already suffers from an abysmally low savings rate, which translates into low investment. The savings-investment gap perpetrates current account deficits, triggering recurring balance of payments crises. Regressive tax measures will only worsen this trend by discouraging savings. The continuation of high-income taxes, including super taxes, is also a significant deterrent to investment and capital formation. The talk of a wealth tax causes further uncertainty and dampens investor confidence. The core issue is that the government seems intent on taxing everything that is documented — merely plugging in numbers wherever feasible. This mindset, along with coercive tactics, erodes trust between the state and the taxpayer and undermines efforts to broaden the tax base. Domestic investors and family business groups are shifting their wealth abroad. Salaried professionals are seeking jobs outside Pakistan. Talent and capital are both leaving the country. This outflow seriously threatens privatisation efforts, especially since history shows that when domestic investors have earned returns — such as in the case of IPPs — the state has reneged on its commitments. Foreign investors, on the other hand, have at times been spared the same treatment. This disparity has made local investors reluctant to bid for Discos unless backed by foreign partners — yet foreign interest remains weak, as seen in the case of KE shareholders who have not received a single rupee as dividend in 20 years. The government urgently needs to improve investor sentiment and foster an enabling environment for investment. However, the current approach — milking the formal sector to implicitly subsidise the informal one — is exacerbating the problem. If the government genuinely wants to be bold, it must do the right things: build trust, broaden the tax net equitably, and create policies that support sustainable, inclusive economic growth. Copyright Business Recorder, 2025
Business Recorder
2 days ago
- Business Recorder
Illicit trade, smuggling: MoC says it doesn't maintain any related data
ISLAMABAD: The Ministry of Commerce (MoC) said on Thursday that it has no role in dealing with illicit (informal) trade and smuggling, nor does it maintain any related data, suggesting a 'Whole-of-Government' approach to address the issue comprehensively. This proposal was put forward by Additional Secretary (Trade Policy), Salman Mufti, during a meeting of the Sub-Committee of the Senate Standing Committee on Commerce, chaired by Senator Sarmad Ali. Senators Faisal Saleem Rahman and Zeeshan Khan Zada also attended the meeting. The sub-committee convened to assess the validity of claims made by the economic think tank PRIME and, if substantiated, to propose sustainable solutions. Pakistan loses Rs750bn tax revenue to illicit trade, smuggling yearly: report PRIME, which includes retired FBR officials among its members, claimed that illicit trade of five items in Pakistan accounts for 56% of total trade, while formal (legal) trade represents only 44%. According to their estimates, the total value of illegal trade is Rs 750 billion annually, including Rs 300 billion in tobacco, Rs 60–65 billion in pharmaceuticals, Rs 106 billion in tyres and lubricants, Rs 270 billion in petrol/diesel, and Rs 10 billion in tea. PRIME also referenced a claim by a member of the Competition Commission of Pakistan (CCP), a former FBR officer with experience in Customs Intelligence, who estimated the volume of illicit trade at $16 billion annually. These figures, particularly the Rs 300 billion attributed to the tobacco sector, raised concerns among committee members, who questioned their accuracy. The Executive Director of PRIME, however, distanced himself from full responsibility for the data, noting that the figures were sourced from various surveys and United Nations reports. Committee members from Khyber Pakhtunkhwa (KP) argued that survey-based data is often perception-driven and lacks concrete evidence. 'The figures related to the tobacco sector appear exaggerated. If they are accurate, then action must be taken against the officials of the relevant agencies for failing to curb this menace,' said Senator Faisal Saleem Rahman, who also chairs the Senate Standing Committee on Interior. He referred to the ongoing national campaign 'Behtareen Pakistan,' which also cites the Rs 300 billion figure for illegal tobacco trade. He warned that if the figure is proven incorrect, PRIME should retract its report, which has been used by major cigarette manufacturers to justify the campaign. 'As someone from KP — where districts like Swabi, Mardan, and Charsadda are major tobacco-growing areas—it is my responsibility to safeguard the rights of our farmers. As Chairman of the Interior Committee, I must also uphold the integrity of law enforcement agencies,' he added. Senator Zeeshan Khan Zada supported his colleague, recommending that the reported financial loss figures be independently verified. He called for a joint meeting of all stakeholders—both public and private—to hear diverse viewpoints and reach a well-informed conclusion. Senator Sarmad Ali suggested inviting representatives from Pakistan Tobacco Company and Philip Morris to the next meeting, along with local cigarette manufacturers, tobacco growers, FBR officials, and law enforcement agencies, to provide a platform for all stakeholders to present their perspectives. The committee also plans to hold a separate meeting focusing on the pharmaceutical sector to investigate the causes of illicit trade and its impact on national revenue. Copyright Business Recorder, 2025
