Pakistan Needs Stronger Prosecution to Combat Illicit Tobacco Trade

ISLAMABAD: (Staff Reporter) – Stronger prosecution and timely judicial proceedings are essential to sustain progress against the illicit tobacco trade in Pakistan, as enforcement operations have yet to translate into convictions despite hundreds of raids and significant seizures, according to a statement issued by Pakistan Tobacco Company (PTC) on Wednesday.

The illicit tobacco trade continues to cause substantial financial losses across the Asia-Pacific region, depriving governments of billions of dollars in tax revenue and undermining legitimate businesses operating within regulated markets.

According to a report titled “Illicit Tobacco Trade in Asia-Pacific: Taxation, Market Incentives, and Macroeconomic Costs,” illegal tobacco activities account for an estimated $14.85 billion in annual revenue losses across the economies covered by the study.

Pakistan alone is estimated to lose approximately $1 billion annually in potential government revenue due to illicit tobacco activities. The report places the country’s illegal tobacco market share at 54 per cent, with lost revenue equivalent to around 117.4 per cent of the taxes collected from the tobacco sector.

However, recent fiscal figures indicate some improvement in the situation. During FY2025-26, sales in the legitimate cigarette market increased from approximately 36.5 billion to 41.5 billion sticks, representing a shift of around five billion cigarettes towards the legal market.

Media reports also indicate that tobacco tax revenues increased from approximately Rs284 billion to Rs329 billion during the same period.

According to industry figures, established legitimate manufacturers contributed around 95 per cent of the additional tax revenue, while other manufacturers accounted for the remaining five per cent. The increase amounted to approximately Rs45 billion, while the estimated illicit market share declined from 54 per cent to 48 per cent.

The improvement in legal cigarette sales and tax collection coincided with stronger government enforcement measures and legislative interventions targeting illegal tobacco production and distribution.

The legitimate tobacco industry acknowledged the government’s efforts during 2025-26, which included electronic monitoring of green leaf threshing facilities, increased surveillance of tobacco transportation from these facilities, deployment of law enforcement agencies and expanded powers for provincial authorities to take action against illegal cigarette manufacturers.

Enforcement operations have resulted in the confiscation of substantial quantities of tobacco, cigarette paper, acetate tow, smuggled cigarettes and products on which applicable duties were unpaid. Authorities have also sealed 14 factories.

Industry data shows that 675 tobacco-related raids were conducted during 2026. However, the industry has highlighted that none of these operations has resulted in a conviction, pointing to a significant gap between enforcement activities and successful prosecution.

Mohammad Ranjha, Senior Fiscal Engagement Manager at PTC, said the progress demonstrated the potential of coordinated action against illicit tobacco activities.

He stressed that the next priority should be ensuring that successful raids lead to effective prosecutions and timely judicial decisions.

PTC appreciated the government’s enforcement efforts and called for stronger coordination among law enforcement agencies, prosecution authorities and the judicial system to ensure that offenders face effective legal consequences.

The company also emphasised the need for deterrent penalties and consistent implementation of existing laws to protect public revenue and businesses complying with taxation requirements.

With approximately $1 billion in estimated annual revenue at stake, effective enforcement, stronger prosecution and balanced fiscal policies remain essential to curbing illicit tobacco activities, safeguarding government income and ensuring fair competition for legitimate businesses.