In a pre-budget media briefing, Asad Shah, Director of the Pakistan Tobacco Company (PTC), raised serious concerns over the growing influence of illicit cigarettes, which now control 58% of the market. He highlighted that the total annual cigarette consumption in Pakistan stands at approximately 82 billion sticks.
Despite the industry's potential to contribute an estimated Rs. 570 billion in tax revenue, only Rs. 292 billion was collected in FY 2023-24, with Rs. 223 billion gathered in the first 11 months of the current fiscal year. Shah stressed that bridging the remaining Rs. 50 billion gap in a single month is unrealistic, pointing to widespread tax evasion and external influences from certain non-governmental organizations.
Over the past 12 years, government tax collection on cigarettes has plummeted from 67 billion sticks to just 34 billion. Shah attributed this decline to flawed tax policies, particularly the 2023 adjustments, which significantly reduced revenue for the second time in a decade.
He revealed that while the legal cigarette sector contributes 98% of total revenue, it now accounts for only 42% of the market share. Shah urged authorities to enforce stricter documentation measures, citing instances where 18 billion sticks are sold at prices below Rs. 150 per pack, bypassing tax obligations.
He emphasized that violations of the government-mandated minimum cigarette pack price of Rs. 162.25 have never resulted in penalties, creating a perception that cigarettes in Pakistan remain inexpensive. To counter this, he suggested raising the minimum pack price and ensuring uniform enforcement of tax stamp regulations.
Additionally, Shah proposed reducing the adjustable tax on acetate tow, a key component in cigarette filter production, from Rs. 44,000 per kilogram to Rs. 4,000 per kilogram to curb smuggling and strengthen regulatory control.