Enforcement against illicit sector must be sustained to reclaim lost revenue

Islamabad (News Desk)- During a media briefing in Islamabad, officials of the Pakistan Tobacco Company appreciated the recent Government efforts to clampdown on the illegal tobacco sector. Collectively the law enforcement agencies have led to confiscation & destruction of cigarettes and raw materials for nearly 17 billion Sticks in 2025. PTC officials stated that this enforcement must be sustained, as illicit sector has increased to an unprecedented level.

Officials shared that the modus operandi of illicit manufacturers has changed to undeclared micro sites across Pakistan which are located on farms to rice mills and to the extent of establishing underground production facilities. The authorities must regulate the complete supply chains of this sector holistically. From raw material controls, manufacturing oversight, track and trace, logistics and distribution, stronger border controls, robust prosecution and legal action against the illicit traders and retail enforcement.

During the briefing session, Mr. Hamza Khan Regulatory Engagement Manager PTC shared how excise revenues have increased in nominal terms but in real terms, adjusting economic figures for inflation to show their true purchasing power over time to reveal actual growth, the collection is worse off than a decade ago. This is because of downtrading from higher price legitimate brands to illegal cheaper brands which has largely been fueled by the unprecedented excise increase in FY 2022 – 23.

Speaking further on other documentation measures by the Government, the officials shared that the FED imposition on Acetate Tow, a key input for manufacturing cigarettes, has led to it becoming the most lucrative product to smuggle across Pakistan. The government in the past year seized more than 500 tonnes of acetate tow, showing the negative impact of high taxation.

Records from the open customs and trade sources show that key inputs, other than the ones on which advance FED has been levied, are still being imported in the same quantity like previous years which shows that there has been less or no decline whatsoever in their production.

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Hamza Khan also shared the abysmal state of affairs to track and trace compliance and the fact that that a myriad of brands remains largely available in the market without track and trace stamps, which is a big question mark on regulation and the impact of a very important regulatory intervention.

Industry stakeholders call on policymakers to maintain robust enforcement against illicit trade to safeguard government revenues, while also considering attaining an equilibrium by a balanced taxation approach that fosters a fair and competitive market for legitimate businesses that directly strengthens the country’s economy.