Sectors including tobacco: ‘Illicit trade continues to be Achilles heel for revenue collectors’

LAHORE: As the federal government gears up to present the FY 2025–26 budget today, illicit trade in sectors including tobacco continues to be the Achilles heel for revenue collectors draining billions of rupees annually from the national economy.

Despite overall improvements in revenue generation, the disproportionate tax burden on compliant businesses is skewing the market, fostering tax evasion, and jeopardizing the survival of legitimate industry players, analysts said.

It may be added that in FY 2023–24, the government garnered Rs. 290 billion in taxes from the tobacco sector. However, the current fiscal year has seen a dip to Rs. 240 billion during the July–April period, underscoring this stagnation. Alarmingly, legal, tax-paying manufacturers, who command less than 50% of the market, contribute a staggering 98% of the sector's total tax revenue. In stark contrast, illicit manufacturers, holding nearly 60% of the market share, contribute a mere 2%, the sources in industry said.

Industry experts emphasize that combating the illicit tobacco trade requires a strategic and enforceable policy framework to close existing loopholes and ensure a level playing field for all market participants.

"The full enforcement of the Track and Trace system across all tobacco manufacturers is essential to monitor production, distribution, and sales in real-time, to stop underreporting and ensure accurate tax declarations," said Osama Siddiqui, an industry expert. “Such steps would help the government provide tax relief to salaried individuals and expand social support for vulnerable segments, which is among the top priorities of the government,” he added.

Copyright Business Recorder, 2025