LAHORE: As the World Health Organisation (WHO) intensified its global drive for greater tobacco taxes, there are growing concerns in Pakistan that the strategy may have the opposite impact.
While intended to reduce smoking, the WHO’s tax-centric approach is exacerbating an already rampant illicit cigarette trade, harming legitimate businesses, depleting public cash, and undermining regulatory integrity, experts of the industry said.
Pakistan has become a case study of unforeseen effects. Despite heavy taxation in accordance with WHO recommendations, the market has seen a noticeable shift toward illicit cigarette consumption, they said.
Illicit cigarette market not as large as tobacco industry claims: WHO
It may be added that legal tobacco companies now control less than half of the market, although accounting for roughly 98% of the industry’s tax revenue. Untaxed and unregulated brands have invaded retail shelves across the country, often selling for less than the legal minimum price and without tax stamps.
“The illicit cigarette trade has now overtaken the legitimate sector, comprising 58% of the total market. Pakistan’s annual consumption is around 82 billion sticks, yet only 34 billion are taxed, down sharply from 67 billion a decade ago,” said Asad Shah, Director at Pakistan Tobacco Company (PTC).
Shah noted that tax revenue potential from the sector stands at around PKR 570 billion annually, but actual collection reached just PKR 292 billion in FY 2023–24 and only PKR 223 billion in the first 11 months of the current fiscal year.
Although the WHO acknowledges illicit trade as a challenge, its policy guidance continues to emphasize taxation over enforcement.
“It’s burdening compliant manufacturers while failing to curtail illicit and smuggled brands,” Shah added.
Experts said that public health objectives must be pursued alongside strong enforcement mechanisms, not only tax increases. Without this balance, the policy risks facilitating tax evasion, undermining investor confidence, and eroding public trust in the regulatory system.
Copyright Business Recorder, 2025
Comments
Comments are closed for this article.