Tobacco industry accused of misleading govt, IMF for tax relief

KARACHI: The tobacco industry is facing criticism for allegedly manipulating data to pressure the government and IMF into reducing taxes, including a proposal to cut the Federal Excise Duty (FED) from Rs5,050 to Rs3,800 per 1,000 sticks, potentially making cigarettes cheaper and more accessible.

With the 2025-26 budget nearing, industry representatives argue that current tax targets are unachievable under the existing FED structure and claim that lower taxes would boost consumption and increase revenue, a claim public finance experts have called “flawed and deceptive”.

Adding to the controversy is the tobacco industry’s long-standing tactic of inflating the scale of illicit cigarette trade in Pakistan. A survey by the Institute for Public Opinion Research (IPOR), claimed that 54 per cent of cigarette brands sold in Pakistan are illicit, causing an annual loss of Rs300 billion in tax revenue.

While the industry projects Rs245 billion in tax collection by June 30, 2025, official data shows Rs240 billion has already been collected by May 15, with year-end estimates nearing Rs285 billion.

The industry also claims 54 per cent of cigarette brands in Pakistan are illicit, causing a Rs300 billion annual tax loss. However, a 2025 study by the Social Policy and Development Centre (SPDC) found that 76 per cent of cigarette sales come from the top 20 brands, 14 of which are registered with the FBR. According to SPDC, locally produced illicit cigarettes account for 14 per cent of the market and smuggled brands 21 per cent, making the actual illicit share closer to 35 per cent.

“Availability is not the same as consumption,” said Asif Iqbal, MD of SPDC, dismissing the industry’s inflated claims. He added, “These narratives are aimed at securing tax relief. Public policy should be based on facts, not industry lobbying. The focus must be on enforcement and closing regulatory gaps.”