Illicit cigarettes take over more than 60% of the market as tax changes drive sales surge

According to a June 14 report by Tribune, data provided by representatives of Pakistan Tobacco Company (PTC) show that since the tobacco excise tax was raised by more than 200% at the beginning of 2023, illicit cigarette sales have accounted for 63% of total sales, indicating that the illegal tobacco market has surpassed the legal market in size.

PTC representatives emphasized that a government-led nationwide anti-illicit tobacco strategy, along with stronger action by dedicated enforcement units, would help reduce illegal trade and increase state revenue.

For the first time in history, the illicit tobacco market may cause the government to lose more in potential tax revenue than the total tax collected from the legal tobacco industry in FY24.

Qasim Tariq, Senior Business Development Manager at PTC, said: “Due to the illicit tobacco market, the government’s potential tax revenue loss is estimated to exceed $1 billion, or more than 300 billion rupees.”

The legal tobacco industry is expected to lose sales of more than 11 billion cigarettes, as many consumers turn to tax-evaded and smuggled cigarettes.

PTC representatives presented monthly shipment data since FY21-22. From January 2023 to June 2023, sales in the legal tobacco industry fell by more than 55%, raising concerns about business sustainability.