Illegal cigarette share falls to 48% as tax collection rises to Rs329bn

Pakistan's crackdown on illegal tobacco products is showing results, with the estimated share of illicit cigarettes in the market falling from 54 percent to 48 percent, according to reports by Express News, Daily Pakistan and the Associated Press of Pakistan.

Tax collected from the cigarette sector rose from Rs284 billion to Rs329 billion. A report by the Center for Market Education Malaysia says the government's measures brought an extra Rs45 billion into the national treasury.

APP reported that the legitimate cigarette market expanded by around five billion sticks during FY2025-26, from approximately 36.5 billion to 41.5 billion sticks, alongside the Rs45 billion rise in tax revenue.

The report says illegal cigarette trade costs Pakistan about $1 billion a year. The revenue lost equals 117.4 percent of total tax from the tobacco sector, and Pakistan ranks third in the Asia Pacific region for financial losses from the trade. Moving one billion cigarettes into the legal sector could bring an additional Rs7 billion in revenue.

In the first eight months of the current year, 675 raids were carried out. They led to the seizure of 2.94 million kg of tobacco used in illegal cigarette making, 77,197 kg of acetate tow and 61,295 kg of cigarette paper. Operations also seized 156 million smuggled cigarettes and 230.9 million locally made cigarettes produced without paying tax.

Fourteen factories involved in illegal production, with a combined annual capacity of 7.4 billion cigarettes, were sealed.

The report notes that despite 675 raids, only four cases were registered, less than one percent of operations, and no one has yet been convicted. It calls for case registration, effective prosecution and punishment under the law, and a joint strategy by law enforcement agencies and the judiciary. It also describes electronic monitoring of green leaf threshing units as an important measure against illegal tobacco trade.