Pakistan is losing a staggering Rs325 billion annually in tax revenue due to the booming illegal cigarette trade, according to a shocking revelation by the Pakistan Tobacco Company (PTC).
During a pre-budget media briefing, PTC’s Director of Legal and External Affairs, Asad Shah, said that illicit cigarette sales have now overtaken the legal market, holding a massive 58% share of the entire cigarette industry in the country.
The legal market, despite accounting for just 42% of the total share, contributes a whopping 98% of all tax revenue generated from cigarettes. This imbalance, Shah warned, is pushing the legitimate industry to the brink, while tax evaders continue to thrive unchecked.
“Pakistan’s annual cigarette production is around 82 billion sticks,” Shah stated. “But taxes are collected on only 34 billion of them. The remaining 46 billion cigarettes are being sold without paying a single rupee in tax.”
If fully regulated, the cigarette tax revenue could soar up to Rs570 billion annually. In contrast, the government managed to collect Rs292 billion in the fiscal year 2023–24, but this year’s collection lags behind at Rs223 billion for the first 11 months. The outlook is grim, with Rs50 billion expected to go uncollected in the final month.
Shah also pointed out that the minimum legal retail price for a cigarette pack is Rs162.75. Yet, smuggled and counterfeit products continue to flood the market at far lower prices, undermining both tax collection and public health efforts.
“Twelve years ago, the government was taxing 67 billion sticks annually. Today, that number has dropped by half,” he said, blaming not only tax evaders but also certain NGOs allegedly working with hidden agendas to protect the illicit trade.
A Tier-1 cigarette pack legally sells for Rs483, of which Rs409 goes directly to the government in taxes. The sharp contrast between the legal sector’s contribution and its dwindling market share highlights the urgent need for enforcement and policy reform.
The PTC's warning comes at a crucial time as budget preparations are underway, and experts say the government must crack down on illegal sales to recover lost revenue. With stronger regulation, Pakistan’s cigarette tax revenue could double, supporting critical national development needs.
