Illegal Cigarette Sales Soar in Pakistan, Costing Rs.300 Billion in Lost Tax Revenue

Pakistan is grappling with a sharp increase in illegal cigarette sales, which now constitute over 50% of the market, resulting in an annual tax revenue loss of Rs.300 billion, according to market sources. This unprecedented rise in illegal sales has severely affected legal cigarette companies, with sales plummeting by 80 crore sticks in the first quarter alone. The overall volume fell from 7.1 billion sticks during July-September last year to 6.3 billion in the same period this year.

Even Pakistan’s top cigarette brands are feeling the impact. Sales for one major Tier 1 brand have dropped from 66 crore sticks to just 30 crore, and experts predict an additional Rs.4 billion decline by the end of the fiscal year if current trends continue. Beyond the domestic market, Pakistan recently missed a $20 million export opportunity to Sudan when a crucial order was canceled due to delays in governmental decision-making.

Economic analysts highlight the need for stronger policies to combat smuggled cigarettes. Recommendations include granting provincial authorities greater power to act against illegal sales, which could help recoup lost tax revenue and curb the market for smuggled products. The urgency of the situation has sparked calls for swift action, as the nation risks further tax revenue losses that could otherwise support public infrastructure and services.