The tobacco industry in Pakistan has long relied on a carefully curated narrative to justify its presence and practices. The tobacco industry often boasts about contributing billions in taxes to the national exchequer, while conveniently ignoring the far greater economic burden it imposes on public health and productivity.
It routinely blames any revenue shortfalls on the illicit cigarette trade, using inflated estimates to deflect scrutiny and weaken regulatory reforms. In its latest public disclosures, Pakistan’s leading tobacco company claimed to have paid approximately Rs 298 billion in taxes during the fiscal year ending 2024. These include Federal Excise Duty (FED), sales tax, and income tax, a figure that the industry frequently highlights to showcase its economic significance.
However, this narrative begins to fall apart under closer scrutiny. While the reported tax contributions appear substantial on paper, they pale in comparison to the economic burden caused by tobacco-related diseases, which cost Pakistan an estimated Rs 700 billion annually. This means that the industry, even at its self-claimed peak performance, is not covering even half the damage it causes to public health and the economy. Despite this imbalance, the industry often garners political and public sympathy by positioning itself as a victim of smuggling and counterfeit markets.
Ultimately, the tobacco industry’s self-promotion as a major taxpayer must be weighed against the full picture of its economic and health impact. Its reported tax payments may seem impressive at a glance, but they are dwarfed by the human and economic costs it leaves behind. The real issue lies not just in lost revenues due to illicit trade, but also in regulatory capture, data manipulation, and systematic exploitation of loopholes. If Pakistan is to meaningfully reduce tobacco consumption and its associated harms, it must adopt a holistic approach, one that includes stronger data transparency, a rational and progressive tax system, and an uncompromising stance against industry influence in policymaking
The illicit trade argument, though not unfounded, is often exaggerated. The industry regularly claims that more than 60 percent of cigarettes sold in Pakistan are illegal. However, a recent independent study placed the share of illicit cigarette trade closer to 33.2 percent, with a higher prevalence in rural areas (around 37 percent) compared to urban areas (25 percent).
The gap between these figures highlights the industry’s tendency to inflate data to shape policy discussions in its favor. Dr. Minhaj-Us-Siraj, CEO of the Health Syndicate, has called out this distortion of facts, stressing the urgent need for government-validated data and independent third-party research. He notes that “the real problem lies in the lack of robust data governance and transparency,” allowing the industry to operate with impunity and spread unverified claims without consequence.
Compounding this issue is the deliberate exploitation of tax loopholes. The current tax structure is highly vulnerable to manipulation, and cigarette manufacturers have become adept at exploiting it. By tweaking the weight of cigarette sticks and adjusting pack sizes, companies can avoid crossing the thresholds that trigger higher tax rates. This tactic is known as differential shifting, along with brand diversification, enables producers to significantly reduce their tax burden while remaining technically compliant. Dr. Waseem Iftikhar Janjua of SDPI has described this as a “game of manipulation” that reflects a structural weakness in Pakistan’s excise regime whereas he argues for a progressive excise tax system that accounts for the social costs of tobacco use and includes health-specific levies to directly address the damage caused by smoking.
Despite several reforms over the years, the tax policy remains ad hoc and poorly adapted to inflation or the industry’s evolving evasion tactics. Muhammad Asif Iqbal, Managing Director Social Policy and Development Centre, believes the current model is outdated and ineffective and talks about a long-term, evidence-based taxation strategy that prioritizes public health rather than focusing solely on revenue generation.
Moreover, the Track and Trace (T&T) system, introduced by the Federal Board of Revenue (FBR) to curb illicit trade and improve tax compliance, has shown mixed results. For instance, while it has registered an additional 2 to 3 billion sticks since early 2024, the system still fails to fully monitor the scope of tobacco production and distribution. There are ongoing concerns about incomplete industry compliance and inadequate enforcement. Dr. Waseem Saleem, affiliated with the WHO Pakistan, warns that industry interference continues to undermine regulatory measures. Unless tax policy decisions are insulated from tobacco industry influence, reforms such as Track and Trace (T&T) will remain limited in effectiveness.
While fiscal reforms are critical, they must be complemented by behavioural and awareness-based interventions. This includes stricter advertising bans, stronger enforcement of existing laws, and large-scale public health campaigns to counter the cultural normalization of tobacco use. No amount of tax reform can fix the problem if the industry continues to have free rein to market to youth.
Ultimately, the tobacco industry’s self-promotion as a major taxpayer must be weighed against the full picture of its economic and health impact. Its reported tax payments may seem impressive at a glance, but they are dwarfed by the human and economic costs it leaves behind. The real issue lies not just in lost revenues due to illicit trade, but also in regulatory capture, data manipulation, and systematic exploitation of loopholes. If Pakistan is to meaningfully reduce tobacco consumption and its associated harms, it must adopt a holistic approach, one that includes stronger data transparency, a rational and progressive tax system, and an uncompromising stance against industry influence in policymaking.
Thwriter is s a Research Assistant at the Sustainable Development Policy Institute (SDPI).
