Islamabad, November 11, 2026: Pakistan needs stronger prosecution and timely judicial action to sustain recent gains against the illicit tobacco trade, which continues to deprive the government of substantial tax revenue and undermine legitimate businesses, according to a press release issued by Pakistan Tobacco Company (PTC).
The report titled “Illicit Tobacco Trade in Asia-Pacific: Taxation, Market Incentives, and Macroeconomic Costs” estimates that illicit tobacco trade results in annual revenue losses of $14.85 billion across the economies covered by the study.
Pakistan alone accounts for approximately $1 billion in estimated annual fiscal losses, placing it among the most affected markets examined in the report. The study estimates that illicit products account for 54 per cent of Pakistan’s tobacco market, with foregone revenue equivalent to approximately 117.4 per cent of the tax collected from the sector.
However, recent fiscal developments indicate an improvement in the legal cigarette market. During FY2025-26, sales by the legitimate cigarette market increased from approximately 36.5 billion to 41.5 billion sticks, representing a shift of around five billion sticks towards the legal sector.
According to media reports cited in the press release, tax revenues also increased from approximately Rs284 billion to Rs329 billion during the same period.
The company said that 95 per cent of the additional tax contribution from legitimate manufacturers came from the country’s two established legitimate manufacturers, while the remaining five per cent was contributed by other manufacturers.
The increase represented an additional Rs45 billion in revenue, while the estimated share of illicit cigarettes declined from 54 per cent to 48 per cent.
The improvement in legal market volumes and tax collection coincided with stronger enforcement measures and legislative interventions. According to industry estimates, every one billion cigarette sticks shifting into the legitimate sector represents approximately Rs7 billion in potential government revenue.
PTC acknowledged the government’s efforts during 2025-26 to curb illicit tobacco trade through legislative, regulatory and enforcement measures.
These initiatives include electronic monitoring of green leaf threshing (GLT), increased monitoring of tobacco movement from GLT facilities, deployment of law enforcement agencies and enhanced powers for provincial authorities to take action against illicit cigarette manufacturers and distributors.
Enforcement operations have resulted in the confiscation of substantial quantities of tobacco, cigarette paper, acetate tow, smuggled cigarettes and duty-not-paid products, besides the sealing of 14 factories.
Industry data recorded 675 tobacco-related raids in 2026. However, the company pointed out that none of these operations had resulted in convictions, highlighting what it described as a critical gap between enforcement action and successful prosecution.
“The progress achieved demonstrates what coordinated action against illicit tobacco can deliver. The next critical step is to ensure that successful raids translate into effective prosecutions and timely legal outcomes,” said Mohammad Ranjha, Senior Fiscal Engagement Manager at PTC.
PTC commended the government’s focus on enforcement and called for sustained efforts to ensure that investigations lead to effective prosecutions and timely adjudication.
It stressed the need for stronger coordination among enforcement agencies, prosecution authorities and the judicial system, alongside deterrent penalties for offenders, to protect public revenue and legitimate businesses.
With approximately $1 billion in estimated annual revenue losses at stake, the company said consistent enforcement, coupled with balanced and predictable fiscal policies, was essential to curbing illicit trade, protecting government revenue and ensuring a fair and competitive environment for compliant businesses.
