Pakistan is losing more than Rs300 billion ($1.1 billion) each year to the illegal cigarette trade due to weak enforcement against illicit manufacturing and smuggling, according to macroeconomic analyst Osama Siddiqui. He said effective action in the tobacco sector could significantly reduce the country’s widening revenue gap.
The shortfall comes as fiscal pressures mount. The Federal Board of Revenue missed its March target by Rs185 billion ($666 million), collecting Rs1,182 billion ($4.3 billion) against a goal of Rs1,367 billion ($4.9 billion) — just a 6% year-on-year increase versus the 21% growth required. Meanwhile, the government is trimming development spending to fund fuel relief, while facing pressure from the International Monetary Fund to withdraw tax exemptions.
Siddiqui argued that instead of raising taxes on already compliant sectors, authorities should prioritize curbing tax evasion in tobacco through stricter action against illegal production and smuggling, full implementation of track-and-trace systems, and tighter retail monitoring. He said plugging these leakages could create fiscal space for public relief and development spending at a time of heightened economic strain.