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Tag: Pakistan

  • Despite Increase, Pakistan Faces Cigarette Tax Revenue Shortfall

    Despite Increase, Pakistan Faces Cigarette Tax Revenue Shortfall

    Contrary to recent optimistic projections, Pakistan’s Federal Board of Revenue (FBR) tax collection from documented cigarette industry is expected to fall significantly from last year, highlighting growing challenges in the sector amid rising smuggling and regulatory inefficiencies.

    For the 2024-25 fiscal year, the government budgeted revenue collected from the cigarette industry to reach PKR 285 billion ($998 million). However, industry insiders and financial analysts say that figure is not grounded in factual analysis, and PKR 250 billion ($875 million) is more realistic.

    According to Business Recorder, a major factor behind the revenue shortfall is the exorbitant imposition of Adjustable Federal Excise Duty (FED) on acetate tow, a key raw material used in cigarette manufacturing. The industry recommended an adjustable FED rate of PKR 4,000 per kg, which was intended to increase the cost of doing business for the illicit players and was supposed to be adjusted against the final tax liability improving documentation and reconciliation. However, the government imposed a FED rate of PKR 44,000 per kg, a sharp rise that has inadvertently made smuggling far more lucrative and has led to a dramatic increase in illicit activity.  

  • Pakistani Tobacco Exporters Urge for Competitive Tax Model 

    Pakistani Tobacco Exporters Urge for Competitive Tax Model 

    At a meeting with Federal Minister for Commerce Jam Kamal Khan, Pakistani tobacco exporters warned that the current tax structure “poses a challenge,” especially for smaller players, and urged the government to adopt a more competitive taxation model. Exporters said the current tax structure—which includes federal excise duties, provincial excise duties, federal tobacco taxes, and a provincial development tax—totals Rs480.15 ($1.68) per kg.

    “They said this cost poses a challenge, particularly for smaller exporters and suggested that a more competitive taxation model would help enhance Pakistan’s position in the global tobacco market,” exporters said in a statement. The exporters emphasized that tobacco, like other agricultural commodities such as sugarcane, cotton, and citrus, should be supported through market-based policies. They noted that annual price adjustments are mandatory under current regulations, which can affect competitiveness in export destinations.

    The tobacco exporters also called for the revival of the Pakistan Tobacco Board to support coordinated efforts in export promotion and policy facilitation. In response, Kamal proposed the establishment of a Sectoral Council for Tobacco, similar to other existing sectoral councils, to provide a structured platform for industry dialogue and representation. 

    Pakistan’s tobacco exports reached $158.35 million in the current fiscal year (July–April), with promising growth in markets such as Belgium, UAE, Greece, and the Philippines.

  • Pakistan Insists No New Taxes on Tobacco Farmers 

    Pakistan Insists No New Taxes on Tobacco Farmers 

    Pakistan’s Federal Law Minister, Azam Nazeer Tarar, said the government is committed to the promotion of agriculture and to providing all necessary facilities to farmers, and that no new regulations or taxes have been imposed on the tobacco crop or landowners in Khyber Pakhtunkhwa Province.

    Speaking in the National Assembly on Friday in response to concerns raised by Syed Waseem and Asad Qaiser regarding the tax on tobacco crop, the minister informed the House that under the leadership of Prime Minister Muhammad Shehbaz Sharif, the government believes in the development of agriculture and in supporting farmers.

    He said that two major multinational tobacco companies pay Rs 250 billion ($900 million) in taxes annually and hold a 44% market share, while local companies hold a 56% share but contribute only slightly more than 3% in taxes.

    Azam said that industries earning profits have a responsibility to contribute their fair share to the national treasury, and that government oversight begins when the crop moves into the processing phase. He said there are some proposals regarding raw tobacco and assured that the government is aware of the challenges faced by farmers.

  • Already Struggling with Illicit Trade, Pakistan Being Pushed to Raise Tobacco Taxes 

    Already Struggling with Illicit Trade, Pakistan Being Pushed to Raise Tobacco Taxes 

    Pakistan’s Federal Board of Revenue (FBR) chairman, Rashid Mahmood Langrial, said massive tax evasion in the tobacco sector is costing the country’s economy nearly Rs300 billion ($1.1 billion), and that, because of limited manpower, only one out of 10 trucks carrying illicit cigarettes is caught.

    Langrial said the FBR is working to train and empower local law enforcement agencies within the provinces to battle illicit trade at the retail level, and that any cigarette without a mandatory stamp is illegal and subject to seizure.

    This comes at a time when the leading legal cigarette manufacturers in Pakistan are reporting significant decreases in sales volumes, presumably because the government placed a 200% Federal Excise Duty (FED) on all brands of cigarettes in the budget for the 2025-2026 fiscal year. Still, sources told Business Recorder that the FBR is facing strong international pressure from the World Health Organization to raise the FED further.

  • Illicit Cigarettes Costing Pakistan $1.1B Annually

    Illicit Cigarettes Costing Pakistan $1.1B Annually

    Tax evasion, weak enforcement of the track-and-trace system, and regulatory loopholes are crippling both public revenue and health safeguards, costing Pakistan over Rs300 billion ($1.1 billion) annually to the illicit cigarette trade, experts said. Speaking on “The Express Tribune Podcast,” in collaboration with #BehtareenPakistan, CEO of the Institute for Public Opinion Research (IPOR), Tariq Junaid, said, “This is not just a health issue—it’s an economic crisis. When more than 40% of the cigarette market goes untaxed, the state loses the ability to fund vital services. Smugglers are filling the gap while legitimate businesses suffer.”

    Panelists on the podcast said illegal cigarette manufacturers are exploiting the system by avoiding the Federal Excise Duty and producing below the legal price threshold. These untaxed products are then sold cheaply, undercutting lawful manufacturers and contributing to a shadow economy that thrives on regulatory inaction. The podcast also explored the broader impacts of the illicit trade. Experts emphasized that this is not simply a revenue issue, it also has dire implications for public health. Consumers of illegal cigarettes are often exposed to unregulated, potentially more harmful products.

    In response to these challenges, the panel advocated for the urgent implementation of a fully functional track-and-trace system to digitally monitor cigarette production and distribution. They also called for tougher penalties for violators and more transparent oversight by tax authorities.

    “There needs to be a serious political will to act,” Junaid said. “The solution is not just about enforcement—it’s about protecting Pakistan’s economy from systemic exploitation.”

  • Pakistan: Cracking Down on Illegal Sheesha Cafes

    Pakistan: Cracking Down on Illegal Sheesha Cafes

    In a coordinated move, district administration and police teams in Pakistan conducted surprise raids, shutting down nine sheesha cafes operating illegally in Bahria Town’s Civic Center. The operation, aimed at curbing unauthorized indoor hookah services, resulted in the arrest of 60 men and 4 women allegedly linked to the businesses.

    According to the spokesman of Islamabad Capital Territory (ICT) administration, 110 hookah devices, along with flavored tobacco products, were confiscated during the raids. The crackdown follows growing concerns over violations of public health regulations and indoor smoking bans. Officials emphasized that the cafes were operating without permits and failed to comply with safety standards.

    District officials highlighted that the action aligns with broader efforts to enforce anti-smoking laws, particularly in indoor spaces. “These facilities posed risks to public health and ignored legal guidelines,” stated a spokesman. “We will continue targeting non-compliant businesses.”

    Authorities confirmed that further inspections are planned across the district to identify similar operations. Residents have been urged to report illegal shisha services via dedicated hotlines. The crackdown marks a renewed push to uphold public health laws, with officials vowing zero tolerance for unauthorized hookah businesses.

  • Punjab to Get Strict With Public Smoking Ban 

    Punjab to Get Strict With Public Smoking Ban 

    Pakistan’s Prohibition of Smoking Ordinance 2002 outlawed smoking in public, but the law was rarely enforced. The Punjab provincial government is looking to change that, however, ordering strict enforcement across the province, including in Rawalpindi. According to reports, the enforcement will be mostly centered around educational institutions, but will also include government offices, hospitals, shopping malls, and public transport. The Express Tribune reported that violators could face fines ranging from Rs1,000 to Rs100,000 ($3.60 to $360) depending on the severity of the offense.

    The provincial government directed all public institutions, especially those under the School Education Department, to appoint focal persons and trainers for tobacco control enforcement.

    “Our top priority is to protect students from tobacco use,” Commission Coordinator Syed Nazrat Ali said. “Tobacco consumption leads to throat cancer, heart disease, and lung disorders, causing over 160,000 deaths annually.” 

    “It is now mandatory for cigarette retailers to display warning notices. Selling cigarettes within 50 meters of educational institutions is strictly prohibited.” He added that designated officers have the authority to impose fines, shut down shops, and confiscate goods in case of non-compliance.

  • Pakistan: IMF Urges Better Control Over Illicit Trade

    Pakistan: IMF Urges Better Control Over Illicit Trade

    The International Monetary Fund (IMF) raised concerns over tax evasion in Pakistan’s cigarette sector, citing that illicit and untaxed cigarettes now account for up to 50% of the industry. According to sources, concern was raised with Pakistani authorities by the IMF delegation during talks about unlocking a $1 billion loan under the current program.

    Sources said that the IMF urged Pakistan to regulate the illegal tobacco market, with discussions also covering a market study on illicit cigarette trade during a detailed session with the Federal Board of Revenue (FBR) regarding the Track and Trace system.

    The IMF lauded FBR’s Track and Trace mechanism, noting that it has significantly reduced tax evasion across four key sectors—sugar, cement, fertilizer, and tobacco. However, it expressed dissatisfaction over the retail sector’s tax compliance, stressing the need for improved revenue collection.

  • Pakistani Growers Getting Squeezed as Cultivation Begins

    Pakistani Growers Getting Squeezed as Cultivation Begins

    Growers in Pakistan started cultivating Virginia and white Patta tobacco last week, but news for them was not all good as purchasing companies have again slashed their quota. The quota was 85.5 million kg in 2023, 77.3 million in 2024, and now reportedly 74.8 million kg for this year. Making the matter worse, according to Liaqat Yousafzai, central president of Tobacco Growers Association Pakistan, is that purchasing companies again didn’t notify growers of their intentions, causing farmers to spend time and money growing surplus crop that will be thrown away.

    “The big issue is that the companies’ demands are decreasing while the tobacco production is increasing,” Yousafzai said. “It is the only cash crop with which the full-year expenditures of the farmers are linked. The companies have reduced their quota for the current year like 2024 without informing the growers in advance.”

    However, when contacted by reporters for The Dawn newspaper, officials for purchasing companies said they had made clear previously that the farmers who failed to execute agreements with the buyers of their choice should give up growing tobacco.

  • Pakistani Tobacco Growers Told to Avoid Surplus

    Pakistani Tobacco Growers Told to Avoid Surplus

    As purchasing companies in Pakistan have slashed their quotas for the year, officials from those companies are advising farmers against growing surplus tobacco. Those officials said that the growers had again reverted to growing tobacco after they were unable to cover the costs incurred on wheat production as official wheat rates were slashed drastically.

    Pakistan Tobacco Company, Philip Morris International, and a few national tobacco-purchasing companies were executing agreements with the growers, however, sources said small cigarette manufacturers avoid those agreements and wait to exploit the growers with leftover tobacco.