ISLAMABAD: The regulated tobacco sector is urging the enforcement of anti-tobacco laws in Pakistan, citing concerns over revenue loss and the proliferation of illicit cigarettes, which are eroding the legitimate industry.
Andleeb Uroos Ahmed, Head of Communications at Philip Morris Pakistan (PMP), emphasized the need to address the growing presence of low-priced, non-tax-paid cigarettes in the country. “The widespread availability of cheap illicit cigarettes is causing a significant decline in volumes for the regulated sector,” she stated during a media briefing here on Wednesday.
Highlighting the financial impact, the PMP team revealed an 86 percent decrease in total income during the fiscal period of January to December 2023. This decline was attributed to high taxes on regulated cigarettes, widening the price gap between legal and illicit products and thus boosting the market share of tax-evading entities.
Ms. Uroos underscored the rise of illicit cigarette manufacturers, particularly in Khyber Pakhtunkhwa (KPK) and Azad Jammu & Kashmir (AJ&K), who are gaining substantial market share while contributing minimally to national revenue.
The surge in illegal cigarettes across Pakistan followed the increase in federal excise duty (FED) in February ’23, with the illicit market share now comprising 63 percent of the total market.
Three main categories of illicit cigarettes were identified, including smuggled packets mainly manufactured in the UAE, non-registered local cigarettes, and counterfeit products of registered brands. These products evade taxes, selling at prices significantly lower than regulated brands.
Despite the introduction of tax stamps and the track & trace system to combat illicit tobacco trade, implementation remains lacking, with counterfeit cigarette packs openly available in markets.
Responding to criticisms from anti-tobacco organizations regarding the effectiveness of tax increases on reducing smoking rates, Ms. Uroos argued that these groups overlook the issue of illicit cigarettes, which bypass taxes and disregard health warning laws.
She cautioned that further tax hikes, coupled with inadequate enforcement, would not only impact government revenue but also undermine public health objectives by driving consumers towards illicit alternatives.
