Minister Bilal Azhar Kayani vows crackdown on illegal cigarette trade

Islamabad: (Web Desk) –  The federal government, working closely with provincial authorities, has initiated a countrywide campaign to tackle the growing illegal cigarette trade.

Speaking at the launch of a study by Oxford Economics, Minister of State for Finance Bilal Azhar Kayani emphasized that stricter enforcement measures will be implemented across provinces to remove untaxed cigarette brands from the market.

He described the situation as critical, stating that the unchecked spread of illegal cigarettes is causing major financial losses to the national treasury, weakening the formal economy, and discouraging compliant taxpayers. Authorities have already shut down several illegal manufacturing units, while raids against retailers selling illicit products are ongoing.

The report highlights the alarming scale of the issue, revealing that illegal cigarettes now make up more than half of Pakistan’s tobacco market. Approximately 43.5 billion illicit cigarettes are consumed annually, placing the country among the largest illegal cigarette markets worldwide. Although overall consumption has remained steady at around 80 billion sticks per year, legal sales continue to decline as consumers shift toward cheaper, untaxed alternatives.

A key factor behind this trend is the sharp increase in excise duties. Between early 2022 and mid-2023, real taxes rose by over 100%, significantly widening the price gap between legal and illegal products. On average, illicit cigarettes are about 36% cheaper, encouraging consumers to opt for these alternatives.

The report also notes that most illicit cigarettes are produced locally, particularly in Azad Jammu and Kashmir and Khyber Pakhtunkhwa, accounting for roughly 64% of the illegal supply. The remaining share enters the country through smuggling routes, mainly via Afghanistan, often linked to international sources.

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Weak enforcement, porous borders, and organized smuggling networks continue to fuel the problem. Existing measures, including the track and trace system, have had limited success due to poor compliance, with only a small fraction of brands fully adhering to regulations.

According to the study, revenue losses from illegal cigarettes range between PKR 274 billion and PKR 343 billion—potentially exceeding the total tax collected from legal cigarette sales.

The report concludes that addressing the issue requires a long-term and coordinated strategy, combining consistent tax policies with stronger enforcement across production, distribution, and retail channels.