Illegal and smuggled cigarettes cause an annual loss of over Rs 310 billion to Pakistan’s economy, according to a report by the National University of Science and Technology (NUST) released on Tuesday.
At the launch event of the report, Federal Minister of Defence Khawaja Asif boldly claimed that Pakistan could potentially collect Rs. 36,000 billion in overall taxes instead of the current Rs. 9,000 billion if systemic issues and enforcement flaws within the Federal Board of Revenue (FBR) were addressed.
Khawaja Asif lamented that tax evaders had infiltrated the Parliament. He further criticized the undervaluation and mismanagement of government properties, which contribute to significant revenue loss. Asif stressed the need for comprehensive reforms and stricter enforcement to curb illegal trade and enhance revenue collection.
The NUST report highlighted that the cigarette sector has a potential annual tax revenue of Rs. 551 billion, but only Rs. 242 billion was estimated for the full fiscal year 2023-24.
The report emphasized the importance of cigarette sector revenue in reducing the fiscal deficit. It revealed an increasing trend of consumers switching to illegal cigarettes, which now dominate 73.5 percent of the market, while the legal market comprises just 36.5 percent of the tobacco sector.
The NUST report recommended that the government implement a comprehensive strategy that includes a balanced excise duty structure, stricter enforcement of existing laws, regular updates to the track and trace system, and focused enforcement in Azad Kashmir to curb the illicit trade of tobacco products.
This detailed analysis underscores the critical need for reforms and enhanced enforcement to improve tax collection and reduce the economic impact of illegal trade.
