Islamabad – A recent report of significant credibility, published by IPSOS, an esteemed international surveying organization, has brought alarming issues in Pakistan’s tobacco industry to light. Mubashir Akram, the National Convenor of ACT Alliance Pakistan, commented on the findings, stating that unbalanced tax policies in Pakistan have particularly increased opportunities for tax evasion among local cigarette manufacturers, causing significant economic damage. He emphasized the need to formulate tax policies, considering the ground realities and the current enforcement system of the Federal Board of Revenue (FBR). He stressed the importance of equipping the Inland Revenue Enforcement Network with operational facilities to enable swift action against those involved in tax evasion based on intelligence information.
The report paints a stark picture, revealing that a staggering 91 cigarette brands in Pakistan are sold below the government’s set minimum price of PKR 127.44 or blatantly violating the Track and Trace System’s (TTS) implementation. These illegally manufactured and unlawfully sold brands are causing an annual loss of 300 billion rupees to the national treasury. The IPSOS survey found that not only are these 91 brands being sold illegally below the set price and without the official Track and Trace System (TTS) stickers. The survey also revealed that 74 cigarette brands are smuggled into Pakistan and are openly sold in all major and minor cities across the country, including the Islamabad Capital Territory.
According to IPSOS, nearly 2.5 billion cigarette packets are sold illegally in Pakistan each year without TTS stickers, yet law enforcement agencies seem unable to halt this ongoing tax evasion. IPSOS released this report after surveying over a thousand retail outlets across all provinces in Pakistan. It highlights that cigarette brands are not only manufactured illegally but also supplied in the market in 25-30-cigarette packets, a practice that is illegal but continues unabated.
Acknowledging the severe economic harm caused by illicit activities in areas known for decades-long production of fake cigarettes, such as Mardan, Swabi, Charsadda, Nowshera, Multan, Sukkur, Karachi, and Mirpur and Bhimber in AJK, Mubashir Akram appealed to the Government of Pakistan to take strict measures against this illegal trade and tax evasion. He stated, “This not only obstructs national economic growth but amounts to economic warfare against the state.” ACT Alliance Pakistan has been working against illicit trade, tax evasion, smuggling, and counterfeiting since 2016, collaborating with its national network and partners to address these issues.
He said that due to the continuous weak enforcement of laws, the legal cigarette industry in Pakistan is now on the brink of destruction. The market share of illicit trade and tax evasion elements has consistently increased over the last three years. In 2022, the illegal cigarette trade was 37%, which has risen to 54% by 2024, while the market share of companies fully compliant with tax laws has decreased from 63% in 2022 to 46%. Unbalanced tax policies and failures in the current enforcement system have led to increased tax evasion incidents, which damage the national treasury and place the legal cigarette industry in difficulties.
Mubashir Akram further urged the Government of Pakistan to immediately develop a comprehensive and effective enforcement strategy to achieve Pakistan’s developmental goals and stop the economic losses inflicted by these illicit activities. He also highlighted the partial demands of some international NGOs, which advocate increased cigarette taxes but fail to address the significant market segment evading taxes entirely. He argued that such one-sided demands disproportionately benefit the nearly 38 local manufacturing entities involved in illicit trade and tax evasion while penalizing the two foreign companies that comply fully with tax laws.
