Weak enforcement: Illicit cigarette trade causing huge losses

LAHORE: Pakistan continues to suffer massive tax losses due to the unchecked rise of the illicit cigarette trade, with the country losing around Rs415 billion annually as enforcement measures fail to keep pace with illegal market expansion.

The enforcement gap is enabling illicit operators to grow freely, undermining the formal sector and depriving the national exchequer of much-needed revenue.

“The government needs to take concrete measures to curb the continuous growth in the illicit sector, which is not only hurting the national economy but is thriving due to weak enforcement,” said Fawad Khan, spokesperson for Mustehkam Pakistan.

Despite contributing 98% of the tobacco industry’s total tax revenue, the legal cigarette sector now holds just 46% of the market share and contributes around Rs270 billion in taxes, sources said.

“With illicit cigarette sales on the rise, law enforcement agencies and policymakers must take urgent action to combat smuggling and unregistered production,” said Khan, adding: “Until enforcement measures are effectively implemented, the national treasury will continue to bleed while non-compliant players operate with impunity. Pakistan has done a great job in restricting INGO’s like CTFK and Vital Strategies who with their partners in Pakistan were actively fiddling with policy making and were operating against the laws.”

It may be noted that the Track and Trace System, expected to be fully deployed across the tobacco industry by December 2023, still remains partially implemented. Delays in enforcement, lack of routine inspections, and weak penalties have allowed non-compliant entities to bypass the system altogether.

Stakeholders now urge immediate action through consistent enforcement drives, enhanced tracking mechanisms, and market-level crackdowns to stop the bleeding.

“The enforcement gap is not just a technical issue; it’s the core reason the illicit trade continues to grow unchecked,” Fawad said, adding: “Without decisive and sustained enforcement efforts, these losses will keep mounting, making recovery even harder for the formal economy.”

Copyright Business Recorder, 2025