Rs 400 billion loss: Illegal Tobacco trade threatens Pakistan’s economy

ISLAMABAD: Experts have warned that the growing illegal trade in the tobacco sector in Pakistan is not only causing huge losses to the national exchequer but has also become a serious threat to state writ, legal business, and economic discipline.

According to experts, a permanent and strict enforcement system has become indispensable to deal with this problem, rather than temporary actions.

Addressing a webinar organized by students of a business school in Islamabad, Act Alliance Pakistan Country Director Mubashir Akram said that the illegal trade in Pakistan has now taken the form of an organized shadow economy, and the tobacco sector is the most obvious example of this.

He said that according to official estimates and reports of senior tax officials, about Rs 400 billion is being evaded annually in the tobacco sector alone, while the actual volume could be much higher if undeclared production, smuggling, hoarding, counterfeit raw materials, and illegal shipments are included.

Mubashir Akram said that when illegal products are available in the open market, it directly harms the national exchequer, the legal industry, and government policies.

He said that in such situations, law-abiding companies suffer losses while illegal networks are strengthened, which weakens the writ of the state.

Appreciating the recent government actions, he said that the seizure of large quantities of duty-free tobacco, cigarettes, and raw materials for making cigarettes is proof that if the government takes serious action, the illegal supply chain can be broken.

However, he clarified that temporary raids and campaigns will not solve the problem, but only continuous enforcement throughout the year can prove effective.

He said that the tobacco market has become a test of enforcement at the moment because a large number of brands are being sold in the market that do not meet legal requirements, including track and trace.

He warned that if taxes are increased without controlling the market, consumers will move towards cheaper and illegal products, which may reduce revenue rather than increase it.

Mubashir Akram urged universities and research institutes to make the illegal economy a serious research topic. He said that the illegal trade spread across various sectors in Pakistan is draining trillions of rupees from the economy, weakening institutions, and punishing law-abiding people, so educational institutions should come up with evidence-based research and policy proposals.

He said that the solution to this problem is not possible through government actions alone, but civil society, media, universities, and state institutions have to work together.

According to him, the media can maintain vigilance, universities can provide research, civil society can create awareness, and the government can ensure strict implementation of the law.

At the end of his speech, he demanded that Pakistan adopt a sustainable model against illegal trade that includes retail-level surveillance, strict testing of raw materials, effective coordination between institutions, and a strong accountability system.

He said that protecting the legal economy is not just a revenue issue but also necessary to restore public trust in the state.