FTT concerned over relentless growth of illegal cigarette trade, smuggling

ISLAMABAD: The Fair Trade in Tobacco (FTT) has raised serious concerns over the relentless growth of the illegal cigarette trade and rampant smuggling, which has reached an alarming 63% of the domestic market, according to a 2024 study.

This figure marks a disturbing rise from 37% just four years ago, reflecting a continuous and unchecked expansion of the illegal cigarette trade that is severely harming the national exchequer and the legal business environment in the country.

Talking to journalists here on Monday, Ameen Virk, Chairman of FTT - a thinktank, emphasised the gravity of the situation, stating that “the unchecked growth of illegal cigarette manufacturing and smuggling is a direct attack on Pakistan’s economy.”

He highlighted that this unlawful sector continues to expand, eating away at much-needed tax revenues and creating an unfair business environment that discourages legitimate investment.

He urged the government to prioritize a comprehensive crackdown against these unlawful businesses that are stealing from the people of Pakistan.

The cigarette industry has a tax potential of over Rs 600 billion. Still, due to the rising illegal trade, only two companies fully complying with federal and provincial regulations contribute nearly Rs 300 billion in taxes (FY2023-24). In stark contrast, 40 local cigarette manufacturers, who dominate 63% of the market, collectively pay only Rs 5 billion in taxes.

Virk pointed out the staggering disparity in tax contribution, stating that two law-abiding companies, holding just 37% of the market, contribute Rs 300 billion in taxes, while 40 local manufacturers, who control the majority 63% of the market, contribute a mere Rs 5 billion. He stressed that “this blatant tax evasion is draining the national economy and depriving Pakistan of much-needed revenue that could be directed toward essential public services, infrastructure development, and economic stability.”

He said that beyond the massive revenue losses, the unchecked illegal cigarette trade creates a hostile business environment for compliant enterprises. Legal companies that adhere to tax regulations and industry laws must compete with manufacturers who bypass taxation and regulatory requirements, offering products at significantly lower, illegal prices. He said, “This situation discourages further investments from legitimate businesses and sends a negative message to potential investors regarding Pakistan’s regulatory landscape and commitment to a level playing field.”

He added that when lawful businesses see their tax-evading competitors flourish without repercussions, it erodes investor confidence and weakens the incentive to expand operations in Pakistan.

Virk said, “The government must act decisively to restore fairness in the market and protect the rights of those who follow the law.”

He urged the Federal Board of Revenue (FBR), and all relevant authorities to take immediate and strict enforcement measures against illegal cigarette manufacturers and smugglers. The illegal cigarette trade is not just an issue of tax evasion; it is a direct attack on Pakistan’s financial stability.

He said that for too long, illegal cigarette traders have been cracking down hard on the country’s economy by stealing from the people of Pakistan. “Now, it is time for the government to crack down hard on them,” he emphasised.

Calling for decisive action, he said this widespread illegal trade must be eliminated. “Such an action would ensure that Pakistan can recover its lost revenues, create a fair business environment, and encourage greater investment in the country’s economy,” Virk said.

Copyright Business Recorder, 2025