“The government should take immediate and decisive action against illegal trade to boost revenue and reduce the tax burden on ordinary citizens. It’s been almost six weeks since the budget was announced, and there are still many illegal items available in the market,” said Fawad Khan, spokesperson for Mustehkam Pakistan, an advocacy firm dedicated to stopping illegal trade and tax evasion in Pakistan.
He expressed serious concern about the harmful effects of illegal trade on the country’s economy and vulnerable communities. He warned that without expanding the tax base and implementing a comprehensive track and trace system along with effective policies to stop illegal trade, the government will struggle to reach its tax-to-GDP ratio target of 13%.
Fawad highlighted a recent report from a foreign research institute that shows approximately 1 trillion rupees are evaded annually in Pakistan across major sectors such as real estate, pharmaceuticals, tyres and lubricants, tea, and cigarettes.
“Tax evasion from the illegal cigarette trade alone causes an annual loss of over 310 billion rupees to the national exchequer, a number expected to increase this year,” Fawad added. He warned that if all cigarette brands are not brought under digital monitoring, the volume of illegal trade could reach 65% this year, creating more problems for the legitimate industry and the government.
Additionally, the Director General of Inter-Services Public Relations (DG ISPR) recently stated in a press conference that around 50-60% of cigarettes in Pakistan are sold illegally, leading to significant economic losses. Similarly, former Prime Minister Shahid Khaqan Abbasi pointed out that billions of rupees are lost due to the sale of illegal cigarettes, and that government authorities are too weak to collect taxes from these illegal manufacturers.
Fawad emphasized that if the government fails to effectively implement the track and trace system this time, it will be very difficult to meet the tax revenue target for the financial year 2024-25. This shortfall in tax revenue will likely force the government to borrow more money, causing further economic imbalance and increasing the debt burden.
By taking strong action against illegal trade, the government can improve revenue collection, support legitimate businesses, and ease the financial pressure on ordinary citizens. This will help achieve a more balanced and sustainable economy.
