Islamabad, June 4, 2025: In a pre-budget media briefing, Asad Shah, Director of the Pakistan Tobacco Company (PTC), raised alarm over the growing dominance of the illicit cigarette trade in Pakistan, warning that it now constitutes the largest share of the market.
Shah revealed that illicit cigarettes currently account for 58% of the total cigarette market, which stands at approximately 82 billion sticks annually. In stark contrast, the legal industry, which holds just 42% of the market share, contributes an overwhelming 98% of total tax revenue from the sector.
He estimated that the tobacco industry has the potential to generate PKR 570 billion annually in tax revenue. However, only PKR 292 billion was collected during the 2023–24 fiscal year, and just PKR 223 billion in the first 11 months of the current fiscal year. “It is practically impossible to collect the remaining PKR 50 billion in a single month,” he said, attributing the shortfall to systemic tax evasion and the unchecked growth of the illicit trade.
Citing historical data, Shah noted that twelve years ago, taxes were collected on 67 billion sticks, compared to only 34 billion sticks today—a steep decline. He blamed the 2023 tax policy for exacerbating the problem, calling it the second major revenue drop from the tobacco sector in a decade.
“The government-set minimum price for a cigarette pack is PKR 162.25, yet 18 billion sticks are being sold below PKR 150 per pack, in clear violation of pricing laws,” he said. “Not a single entity has ever been penalized for selling below the minimum price. Without non-discriminatory enforcement, no policy can succeed.”
Shah stressed the urgent need for stricter documentation enforcement across the entire supply chain and advocated raising the minimum price per pack to reduce the perception of cigarettes being “cheap” in Pakistan.
He further criticized the ineffective implementation of the track-and-trace tax stamp policy. “If it cannot be enforced uniformly, then it is not serving its purpose,” he said.
To tackle smuggling, Shah proposed a reduction in the adjustable tax on cigarette filter material acetate tow—from the current PKR 44,000 per kilogram to PKR 4,000 per kilogram. Authorities have seized 450 metric tons of smuggled acetate tow this year alone, highlighting the scale of the issue.
He also recommended imposing adjustable taxes on cigarette paper to ensure full documentation of the production process.
Shah concluded by warning that the unchecked expansion of the illicit sector not only undermines legal businesses but also deprives the national exchequer of vital revenues that could support economic development.
