Political Influence Threatens Pakistan’s Crackdown Against Tax Evasion in the Tobacco Sector

Muhammad Amin Chairman Fair Trade in Tobacco Pakistan’s tobacco sector has become a sharp test of governance, state authority, and political resolve. On one side are documented companies that pay billions in taxes, comply with regulatory requirements, and remain visible to the enforcement system. On the other hand, there is a large illegal cigarette network that evades duties, violates Track and Trace rules, floods markets with cheap, untaxed cigarettes, and allegedly benefits from weak enforcement, administrative gaps, and political influence. This underground trade is no longer a peripheral violation. It has become a parallel economy that challenges the state’s writ and undermines the rights of lawful businesses. A report published in May 2025 exposed the scale of imbalance within the sector. Two multinational cigarette companies, holding 44 percent of the market, paid nearly Rs. 292 billion in taxes during FY2023-24. Meanwhile, more than 40 local manufacturers, controlling 56 percent of the market, contributed only about Rs. 5 billion. The figures showed a sector in which the compliant segment carries the fiscal burden, while large parts of the market continue to operate outside the documented economy. The crisis became even more serious in April 2026, when an Oxford Economics study estimated that illegal cigarettes now account for more than half of Pakistan’s tobacco market. Out of roughly 80 billion cigarettes consumed annually, nearly 43.5 billion were illegal. The report stated that 64 percent of the illegal trade comes from domestic production hubs in Khyber Pakhtunkhwa and Azad Jammu and Kashmir, while the remaining share enters mainly through smuggling routes linked to Afghanistan. The economic damage is severe. In November 2025, the Federal Board of Revenue estimated annual revenue losses of Rs. 250 billion to Rs. 300 billion due to illegal cigarette manufacturing and smuggling. Recognizing the seriousness of the issue, Prime Minister Shehbaz Sharif direc