Islamabad, 5 June 2025: Cigarettes Go and with them, a significant chunk of Pakistan’s tax revenue. That’s the concern voiced by senior officials at the Pakistan Tobacco Company (PTC), as the country braces for its upcoming fiscal budget.
Speaking during a pre-budget media session, Asad Shah, Director at PTC, warned that the illegal cigarette trade has overtaken the legal market, now accounting for a staggering 58% share of the overall cigarette sector. The national market size is estimated at 82 billion sticks annually, yet the state is seeing diminishing returns.
Shah emphasized that the tobacco industry has the potential to contribute as much as Rs. 570 billion annually in taxes. However, actual collections for FY 2023–24 amounted to just Rs. 292 billion, with Rs. 223 billion collected in the first 11 months of the current fiscal year.
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He dismissed the possibility of recovering the remaining Rs. 50 billion in a single month, pointing instead to systemic tax evasion and the influence of certain advocacy groups that, he claimed, push narrow agendas.
The director highlighted that a decade ago, tax was collected on 67 billion cigarette sticks. Today, that figure has plummeted to 34 billion.
The downturn is largely attributed to a controversial tax policy enacted in 2023, which Shah says inadvertently reduced government income from the tobacco sector the second such decline in ten years.
Currently, the legitimate cigarette industry holds only 42% of the market, yet contributes a staggering 98% of the tax revenue. Cigarettes Go under the radar as evasion continues unchecked.
Shah pointed out a gaping loophole: although the government-set minimum retail price per cigarette pack is Rs. 162.25, an estimated 18 billion sticks are being sold at or below Rs. 150 effectively bypassing taxation.
He noted that no punitive action has ever been taken against violators of the minimum pricing regulation, which, in his view, only reinforces the public perception that cigarettes remain inexpensive in Pakistan.
Calling for urgent reforms, Shah advocated for strict enforcement of documentation requirements across the entire supply chain. He warned that “no policy can deliver results without fair and universal implementation.”
He also criticized the ineffective application of the tax stamp program, saying that unless the track-and-trace system is applied uniformly, it serves little purpose.
To further combat smuggling, Shah suggested slashing the adjustable tax on acetate tow the primary material used in cigarette filters from Rs. 44,000 per kilogram to Rs. 4,000.
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Authorities have reportedly seized 450 metric tons of illegally imported acetate tow this year alone. Additionally, he proposed that a similar adjustable tax be levied on cigarette paper to ensure transparency in raw material usage.
Cigarettes Go unchecked without consistent regulation, he warned, adding that without decisive action, the state will continue losing billions in potential tax revenue while the illegal trade thrives.
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