Govt Reviews Illicit Tobacco Trade and Enforcement Gaps

Federal Minister for Commerce Jam Kamal Khan on Thursday met with a delegation from Philip Morris International to discuss key challenges confronting Pakistan’s tobacco sector, including illicit trade, regulatory enforcement, traceability gaps, and export potential.

The delegation, headed by Marco Mariotti, briefed the minister on the scale of undocumented cigarette sales in the country, stating that the illicit tobacco market was causing an estimated annual revenue loss of approximately Rs350 billion.

According to the delegation, nearly 45 billion to 47 billion cigarettes are reportedly being sold without payment of applicable taxes, creating significant challenges for documented manufacturers operating within the formal regulatory framework.

Discussions during the meeting covered issues related to tobacco procurement, under-reporting of production, and weaknesses in traceability systems throughout the supply chain.

Participants observed that registered companies remain subject to strict compliance requirements, whereas undocumented manufacturers continue to access raw materials through misuse of contractual arrangements and gaps in oversight mechanisms.

The delegation also expressed concerns regarding undocumented income flows, money laundering risks, and broader economic distortions linked to the informal cigarette market.

Officials informed the minister that while laws, tax stamp mechanisms, and regulatory frameworks are already in place, enforcement remains inconsistent across various levels.

The meeting emphasised the need for coordinated enforcement efforts involving both federal and provincial authorities, including institutions such as the Federal Board of Revenue (FBR) and the Federal Investigation Agency (FIA).

Participants further reviewed the role of the Pakistan Tobacco Board, noting that although the board is responsible for crop estimation and price-setting functions, its monitoring and enforcement capacity remains limited.

The delegation proposed strengthening and restructuring the Pakistan Tobacco Board to improve sector documentation and regulatory oversight.

The discussion also examined policy-related challenges arising from Pakistan’s commitments under the International Monetary Fund programme, particularly reforms concerning import restrictions and equal treatment of commercial and industrial importers.

Stakeholders indicated that these reforms could complicate regulation of inputs used in cigarette manufacturing.

Jam Kamal Khan described illicit tobacco trade as a “multi-layered challenge” requiring a comprehensive strategy spanning the entire supply chain, from cultivation and manufacturing to wholesale and retail distribution.

The commerce minister stated that the primary issue lies in weak enforcement rather than absence of policy and stressed the importance of stronger coordination between federal and provincial institutions.

He directed officials to consolidate stakeholder proposals into actionable recommendations focused on strengthening enforcement mechanisms, improving traceability systems, and reducing the size of the undocumented economy.

The meeting concluded with both sides agreeing to maintain engagement on measures aimed at curbing illicit trade and supporting the formal tobacco industry.