Illegal tobacco trade costs Pakistan over Rs300bn in taxes each year

ISLAMABAD: ACT Alliance Pakistan Country Director Mubashir Akram has said the illegal tobacco sector deprives Pakistan of more than Rs300 billion in tax revenue annually, while warning that the overall scale of the illicit business could be far larger once its wider supply chain is taken into account.

Speaking to reporters, Akram said the losses linked to illegal tobacco go beyond the sale of untaxed cigarettes and may be three to four times greater when manufacturing, transportation, storage and retail operations are also included.

He welcomed the government’s recent crackdown on illegal cigarette production, smuggled brands and violations of the Track and Trace system, describing such steps as necessary to safeguard state revenues and protect law-abiding businesses operating in the formal economy.

Warning over pressure on enforcement

Akram said those involved in the illegal trade could try to use their influence to obstruct the work of Federal Board of Revenue officials engaged in enforcement operations. He cautioned that any weakening of the state’s response would have wider consequences for the country’s business environment.

Referring to investor confidence, he said foreign investors closely observe whether the state is willing and able to protect compliant businesses from unfair competition created by illegal operators.

Akram said the government should extend full institutional support to enforcement personnel, whom he described as playing a key role in defending the country’s economic interests.

He also stressed that sustained action against the broader illegal economy could, over time, generate tens of billions of dollars in additional national tax revenues.

Impact on investment climate

Akram linked the issue of illicit tobacco trade to Pakistan’s international economic standing, saying any successful attempt by illegal operators to pressure the system would send a negative signal to those responsible for bringing foreign direct investment into the country.

He said recent enforcement measures were important not only for revenue collection but also for demonstrating that the state supports businesses that comply with tax and regulatory requirements.

According to Akram, consistent implementation of anti-illicit trade measures is essential if Pakistan is to preserve its revenue base and maintain confidence among investors and formal sector businesses.

While discussing the risks posed by illegal operators, Akram said the state’s response must remain firm and uninterrupted to prevent any rollback in enforcement efforts.

At the same time, he reiterated that the illicit tobacco economy should be viewed in a broader context, as its financial footprint extends beyond tax evasion on cigarette sales alone and includes multiple layers of commercial activity.

Akram said stronger and sustained enforcement would help protect legitimate businesses while improving the government’s ability to collect revenue that is otherwise lost to illegal trade.

Attributing importance to continuity in the crackdown, he said the benefits of such action would accumulate over time if the campaign is pursued consistently across the illegal economy. "If illegal operators succeed in pressuring the system, it will damage Pakistan's reputation before those responsible for bringing foreign direct investment," Akram said.