Islamabad – ACT Alliance Pakistan has appreciated the Federal Board of Revenue for its recent actions against illegal tobacco trade, illegal cigarette manufacturing, non-duty-paid stock, and violations of the Track and Trace System (TTS), which will result an increase of approx 50 billion in tax revenue during current financial year. These enforcement steps show that the real revenue challenge in Pakistan’s cigarette sector is not the tax rate on legal products alone, but the expanding illegal cigarette economy that continues to steal market share and public revenue.
Mubashir Akram, Country Director, ACT Alliance Pakistan said in a statement that it is unfortunate that several foreign-funded local NGOs continue to focus almost exclusively on increasing taxes on the legal tobacco industry, while remaining silent about the local illegal cigarette manufacturers, smuggled brands, underpriced packs, and non-TTS products that are damaging tax collection far more directly.
Mubashir Akram strongly criticized various NGOs for presenting what he called a “selective, incomplete, and deeply misleading” account of Pakistan’s tobacco economy, saying that such narratives damage public understanding, weaken fiscal policy, and divert attention away from the real issue of tax evasion by local cigarette manufacturers. These NGOs continues to understate the illegal cigarette market figures and its fiscal damage,” he said.
“Recently an NGO places illicit cigarette consumption at around 34 to 35 percent while broader market evidence places it is more than 50 percent, the issue is no longer simple disagreement. It becomes a serious question of methodology, real hidden motive, and policy consequence.” Mubashir Akram added still if we take this NGO’s illicit market numbers of 35%, it means in Pakistan with a cigarette annual market of 80 billion, illegal cigarette market is about 28 billion sticks and annual loss of Rs 118 billion which is still huge for pakistan and cannot ignorable under the cover of NGO’s agenda.
He said the legal tobacco industry’s data and independent assessments indicate that total cigarette consumption in Pakistan has remained broadly stable at around 80 billion sticks annually, while legal sales have collapsed from nearly 65 billion sticks to nearly 36 to 40 billion sticks. “This means demand has not disappeared,” Mubashir Akram said. “It has migrated from the documented, tax-paying sector to the illegal, untaxed, and unregulated sector.”
Mubashir Akram further said that the NGO’s estimate of annual revenue loss at Rs. 115.6 billion severely understates the damage. He noted that other assessments place annual fiscal leakage from illicit cigarettes between Rs. 274 billion and Rs. 343 billion, while industry estimates and market realities suggest that the illegal cigarette sector is stealing over Rs. 400 billion every year, equivalent to more than one billion US dollars. “The legal tobacco sector pays nearly one billion dollars in taxes and duties, while the illegal sector steals more than one billion dollars from the state. Any policy debate that ignores this contrast is not serious economic analysis,” he said.
Mubashir Akram also rejected the claim that repeated tax increases are automatically effective in reducing consumption and increasing revenue. He said Pakistan’s experience shows the opposite when enforcement remains weak. “Despite a massive increase in excise rates, real revenue performance has remained weak because the tax base has been eroded,” he said. “Higher taxes on compliant companies do not hurt the illegal cigarette mafia. They strengthen it by pushing price-sensitive consumers into cheaper, non-duty-paid products.” NGO’s strategy of hiding the real revenue losses and pushing for the increasing in taxes will result in shifting of consumers from the legal documented sector to the tax evading illegal sector. So it is crystal clear that real beneficial of these NGOs tax increase agenda is the local tax evading cigarette manufacturers.
He said NGO’s interpretation of the Track and Trace System is equally flawed. Retail evidence cited in the industry rebuttal shows that only 22 out of 477 sampled brands were fully compliant, while more than 80 percent of brands were reportedly sold below the minimum legal price. “A tax stamp on a limited part of the market does not mean the system is working,” Mubashir Akram said. “Track and Trace cannot succeed if illegal factories, non-compliant brands, below minimum legal price sales, and retail-level violations continue unchecked.”
He further said the silence of NGOs on the illegal cigarette economy raises legitimate public-interest questions. “Why do these NGOs wake up aggressively against the legal tobacco industry every budget season with one agenda of tax increase , but remain almost silent on the illegal cigarette mafia that evades taxes, violates health warnings, bypasses Track and Trace, and allegedly feeds money laundering and criminal financing risks?” he asked. “The government should ask who benefits when the compliant industry is attacked and the illegal industry is ignored.”
ACT Alliance Pakistan made it clear that it supports lawful regulation, documentation, and responsible enforcement, but opposes agenda driven policy advocacy that punishes the legal sector while leaving illegal operators untouched.
“Pakistan’s tobacco policy must be written by the economy and financial experts, not through so called health advocates with a proven financial benifical links with Mardan based cigarette manufacturers.” Mubashir said. “The government must listen to the evidence, not pressure from politicians linked with cigarette industry and their mouth piece NGOs. It must protect the tax base, defend lawful business, and crush the illegal cigarette mafia that has operated for decades under weak enforcement and convenient silence.”
ACT Alliance Pakistan called on the federal government, FBR, provincial administrations, and enforcement agencies to prioritize sustained action against illicit manufacturing, smuggling, counterfeiting, below minimum price sales, and non-compliant retail distribution. Mubashir Butt concluded that tax policy must be sequenced correctly: stabilize the legal market, expand enforcement, recover the tax base, and then pursue gradual, evidence-led reforms.
“Pakistan cannot afford economic policy built on slogans,” he said. “The real test is whether the state will protect a lawful sector that pays nearly one billion dollars, or continue allowing illegal operators to steal more than that every year.”
