Pakistan Suffers Over $1b Loss Due to Illicit Cigarette Trade

Staff Report

Pakistan is estimated to suffer a loss of over $1 billion due to illicit cigarette trade.

The government and the health sector activists were failing to control the widespread smuggled cigarettes, that are openly sold in the urban as well as rural markets without graphic warnings and even below the minimum prices set by the FBR.

“The potential loss of government tax revenue due to smuggled and other illicit cigarette trade is estimated to be more than $1 billion or more than Rs300 billion,” Qasim Tariq, the Senior Business Development Manager, of Pakistan Tobacco Company Limited (PTC) has said.

Briefing media here on Thursday he said that after the increase of more than 200 percent in Federal Excise Duty (FED) on tobacco products in January 2022, the share of illicit as well as smuggled cigarettes has surged.

The PTC representative said that there were three legal players in the sector including the PTC, Philip Morris, and the Khyber Tobacco Company but their collective market share was only 37 percent.

However, the share of smuggled cigarettes has grown to 13 percent and the non-tax paid locally manufactured cigarettes has swelled to 50.2 percent.

Mr Tariq added that the government-led national anti-illicit tobacco strategy and revitalizing the dedicated enforcement task force could help reduce illegal trade in the tobacco sector and help grow government revenues.

He added that for the first time in Pakistan’s history, potential government revenue loss due to the illicit sector would surpass the total revenue to be collected from the legitimate industry by the end of this fiscal year.Custom Intelligence Confiscates Smuggled Cigarettes Worth Millions

He said that the on-ground situation shows that FBR was less interested in curbing cigarette smuggling and stopping the sale of cigarette packs without the tax stamps of FBR.

“Without any enforcement, revenue generation from the legitimate tobacco sector would only be short-lived,” he said.

He added that while the increase in excise has enhanced revenue collection it only led to putting business sustainability at risk because the lucrative black-marketing in the cigarette sector was enhancing its market share.

He said that the retail price of one packet of locally made dual flavor was around Rs650 whereas the similar quality cigarettes made in Dubai were available in Pakistan at around Rs150 per packet.