Key points:

• Pakistan’s Federal Board of Revenue (FBR) estimates that tax evasion in the tobacco sector results in an annual loss of nearly Rs300 billion ($1.1 billion) to the national economy.
• FBR Chairman Rashid Mahmood Langrial highlighted that due to limited enforcement capacity, only one out of every ten trucks transporting illicit cigarettes is intercepted.
• The FBR is collaborating with provincial law enforcement agencies to enhance efforts against illicit tobacco trade at the retail level, emphasizing that any cigarette lacking the mandatory tax stamp is illegal and subject to seizure.

Pakistan’s economy is incurring substantial losses due to tax evasion in the tobacco sector, with the Federal Board of Revenue (FBR) estimating an annual shortfall of nearly Rs300 billion (US$1.1 billion). FBR Chairman Rashid Mahmood Langrial disclosed that enforcement challenges hinder efforts to curb the illicit trade.

“Due to limited manpower, only one out of every ten trucks carrying illicit cigarettes is caught,” Langrial stated, underscoring the scale of the issue. He emphasized that any cigarette without a mandatory tax stamp is deemed illegal and is subject to seizure.

In response to these challenges, the FBR is intensifying collaboration with provincial law enforcement agencies to combat the illicit tobacco trade at the retail level. This initiative aims to enhance the detection and prevention of illegal cigarette sales across the country.

The situation is further complicated by the implementation of a 200% Federal Excise Duty (FED) on all cigarette brands in the 2025–2026 fiscal budget, leading to a significant decline in sales for legal manufacturers. Despite this measure, sources indicate that the FBR is under pressure from international health organizations, including the World Health Organization, to increase the FED even further.

A recent study published in the journal Tobacco Control revealed that nearly one-third of cigarette packs collected from major Pakistani cities lacked the required tax stamps, indicating widespread non-compliance with the country’s Tracking and Tracing System (TTS). The study highlighted that even major tobacco companies have not fully adhered to the TTS, pointing to enforcement deficiencies.