LUMS report highlights alarming increase in illegal cigarette market in Pakistan

The Lahore University of Management Sciences (LUMS) has released a comprehensive report detailing the rampant availability and significant impact of illegal cigarettes in Pakistan.

According to the report, illegal cigarettes are easily accessible across the country, resulting in a substantial annual loss of 300 billion PKR to the national exchequer due to tax evasion within the cigarette industry.

The report emphasizes that only 42% of cigarettes sold in Pakistan are subject to tax, leaving a staggering 58% market share for illegal cigarettes. This issue is particularly pronounced in rural areas, where 62% of cigarettes sold are illegal, compared to 56% in urban areas.

Contrary to expectations, increasing the excise duty on cigarettes has not led to a reduction in smoking rates. Instead, the report suggests expanding the tax net rather than merely raising tax rates. Improving the performance of the Federal Board of Revenue's (FBR) track and trace system is also highlighted as a critical measure.

Furthermore, the report calls for policies that align with ground realities to enhance tax collection and promote foreign investment. The public sale of illegal cigarettes raises serious concerns about the effectiveness of government oversight and regulation in this sector.

LUMS urges the government to address these issues urgently, as the proliferation of illegal cigarettes not only hampers tax revenue but also undermines public health initiatives.