Illicit-cigarette trade causes economic, public health challenges: study

LAHORE: The illicit cigarette trade in Pakistan has become a pressing economic and public health issue, primarily driven by weak regulatory enforcement and a lack of awareness among retailers. This was revealed in a study conducted by Umeed-e-Sehar, a nonprofit organization dedicated to public health initiatives.

As per findings of the study titled- Tax Stamps and Illicit Cigarette Sales in Pakistan: Understanding Retailers’ Knowledge Gap, there are alarming gaps in retailers’ awareness regarding tax stamps, pricing regulations, and legal packaging compliance in Pakistan’s cigarette market.

The study has highlighted the weak enforcement on the illicit cigarette trade, as 97 percent of retailers reported that FBR officials had never approached them for compliance guidance, while 86 percent were unaware of government-imposed penalties for selling illicit cigarettes.

As many as 2,000 retailers across seven major cities, including Karachi, Lahore, and Islamabad were surveyed and as per findings of study, only 27 percent of retailers could differentiate between tax-paid and illicit cigarette packs. In contrast, a staggering 73 percent did not know the correct placement and purpose of tax stamps.

As per study, the majority of retailers, about 86 percent, identified price as the primary indicator of cigarette legality rather than checking for tax stamps, which only 12 percent of them considered. Around 59 percent of retailers estimated that between 30 to 60 percent of cigarette packs in their inventory lacked tax stamps, while 29 percent believed that more than 60 percent of the stock was illicit.

The findings underscore retailers’ key role in Pakistan’s illicit cigarette trade. With over 50 local and international companies and an estimated annual consumption of 80 billion cigarettes, the industry faces a major challenge as illicit trade continues to erode the market share of legitimate firms.

The study also found that the Federal Board of Revenue (FBR) introduced the TransAct App to help retailers verify tax stamps, yet 98 percent of the surveyed retailers were unaware of its existence, and 99 percent never used it.

Copyright Business Recorder, 2025