Illicit cigarette trade causes Rs350bn annual loss, minister told

ISLAMABAD: Pakistan is losing an estimated Rs350 billion in revenue each year because of the illicit cigarette trade, while around 45 billion to 47 billion cigarettes are being sold without tax, Federal Minister for Commerce Jam Kamal Khan was told during a meeting with a delegation led by Philip Morris International's Marco Mariotti, according to a statement issued on Thursday.

The delegation told the minister that undocumented cigarette production and the misuse of contracts were enabling informal market players to obtain raw materials, which they said was creating an uneven competitive environment for the formal sector.

Participants in the meeting identified a number of structural weaknesses in the tobacco supply chain. These included the procurement of tobacco leaf, under-reporting of production and weak traceability arrangements, according to the statement.

The discussion also noted that only a limited number of actors were benefiting disproportionately from the undocumented segment of the market, while formal businesses were facing compliance requirements and higher costs.

Those attending the meeting said the issue was not limited to tax losses alone. They said it also involved undocumented income, money laundering and wider distortions in the economy.

Enforcement concerns highlighted

A central point raised during the meeting was the need for stronger enforcement. Participants said laws, tax stamp systems and regulations were already in place, but their implementation remained uneven and required coordinated action by both federal and provincial authorities.

The meeting was also told that the Pakistan Tobacco Board had limited enforcement capacity. Participants stressed the need to restructure and strengthen the board so that documentation and monitoring could be improved.

According to the statement, the meeting further reviewed policy issues linked to Pakistan's commitments to the International Monetary Fund (IMF). These included the gradual withdrawal of import restrictions, which participants said could make it more difficult to control key inputs used in cigarette manufacturing.

The statement said the concerns were presented during the meeting with the commerce minister by the delegation headed by Marco Mariotti of Philip Morris International.

The meeting focused on how undocumented activity in the cigarette market was affecting revenue collection, regulation and the operating environment for documented businesses, while also raising concerns about broader financial and economic implications.

Participants said that although a legal and regulatory framework existed, more consistent implementation and stronger institutional capacity were needed to improve oversight of the sector.