Pakistan’s anti-illicit tobacco drive faces prosecution challenges

ISLAMABAD, November 11, 2026: Pakistan is estimated to lose around $1 billion annually in government revenue due to illicit tobacco trade, with industry stakeholders calling for stronger prosecution and timely judicial action to sustain recent gains against the illegal cigarette market.

According to the report Illicit Tobacco Trade in Asia-Pacific: Taxation, Market Incentives, and Macroeconomic Costs, illicit tobacco trade causes estimated annual revenue losses of $14.85 billion across the economies covered by the study.

Pakistan accounts for approximately $1 billion of these losses, with illicit products estimated to hold 54% of the domestic tobacco market. The report also estimates that foregone revenue is equivalent to around 117.4% of tobacco taxes collected.

Legal Cigarette Market Shows Signs of Recovery

Recent fiscal figures indicate progress in shifting cigarette consumption towards the legitimate market.

During FY2025–26, the legal cigarette market reportedly expanded from approximately 36.5 billion to 41.5 billion sticks, representing an increase of around five billion sticks.

Over the same period, tax revenues increased from approximately Rs284 billion to Rs329 billion, according to media reports.

The industry estimates that the illicit market share declined from 54% to 48% during this period.

Around 95% of the additional tax contribution from legitimate manufacturers reportedly came from the two established legal manufacturers, while the remaining 5% came from other market participants.

Industry estimates suggest that every additional one billion cigarette sticks shifting into the legitimate sector could generate approximately Rs7 billion in government revenue.

Government Enforcement Intensifies Against Illicit Tobacco

The improvement has coincided with stronger government enforcement and legislative interventions during 2025–26.

Measures include electronic monitoring of green leaf threshing, increased monitoring of tobacco movement from green leaf threshing (GLT) facilities, deployment of law-enforcement agencies and enhanced powers for provincial authorities to take action against illicit cigarette operations.

Enforcement agencies have also confiscated substantial quantities of tobacco, cigarette paper, acetate tow, smuggled cigarettes and duty-not-paid products.

Additionally, 14 factories have been sealed, while industry data records 675 tobacco-related raids during 2026.

Prosecution Remains a Critical Missing Link

Despite the scale of enforcement operations, the industry identifies a major gap between seizures and legal outcomes, reporting that none of the recorded actions has resulted in convictions.

Stakeholders argue that raids and confiscations alone cannot deliver lasting results unless investigations lead to successful prosecutions and timely judicial decisions.

Mohammad Ranjha, Senior Fiscal Engagement Manager at Pakistan Tobacco Company (PTC), said the progress demonstrated the potential of coordinated action against illicit tobacco.

He stressed that the next priority should be ensuring that successful raids translate into effective prosecutions and timely legal outcomes.

PTC Calls for Stronger Coordination Across Justice System

PTC has acknowledged the government’s efforts to combat illicit tobacco and called for enforcement momentum to be matched by stronger prosecution and timely adjudication.

The company has urged improved coordination among enforcement agencies, prosecution authorities and the judicial system, alongside deterrent penalties for offenders.

With approximately $1 billion in estimated annual government revenue at stake, the industry says consistent enforcement and balanced, predictable fiscal policies are essential to tackling illicit trade, protecting public revenues and ensuring fair competition for compliant businesses.