Pakistan Tobacco Company urges the federal government to curb illicit trade and rationalise taxation just days before the federal budget announcement.
ISLAMABAD: A major tobacco giant in Pakistan has held a high-stakes meeting regarding taxation with the Federal Minister for Commerce, Jam Kamal Khan, just a day before the presentation of the federal budget for 2026–27.
The Minister assured the tobacco industry delegation that the government will carefully examine its proposals regarding taxation, stricter enforcement against illicit trade, and targeted measures aimed at strengthening Pakistan’s documented economy while promoting investment and exports.
The assurance came during a meeting with a delegation from the Pakistan Tobacco Company (PTC). The discussion focused primarily on budget-related proposals, pressing challenges facing the tobacco sector, and necessary interventions required to curb the growing illicit cigarette trade.
Illicit Cigarette Market Shrinks Following Stricter Enforcement
The PTC delegation informed the Minister that strengthened enforcement measures over the past year had successfully contributed to a reduction in the market share of illicit cigarettes. This shift has resulted in improved government revenues and growth within the documented sector.
According to the delegation, continued enforcement against non-duty-paid and smuggled cigarettes could further enhance national tax collection while creating a level playing field for compliant businesses. However, they highlighted serious, ongoing concerns regarding the increasing influx of smuggled tobacco products, particularly through border regions.
“Cigarettes have become one of the most lucrative smuggled products in the country, causing substantial losses to the national exchequer and heavily undermining compliant manufacturers,” the PTC delegation emphasised.
Key Demands Raised by the Pakistan Tobacco Company
To combat these challenges, the company urged the government to implement several fiscal reforms in the upcoming FY27 budget:
• Restore the Final Tax Regime (FTR): Reinstate a simplified FTR mechanism for imports.
• Rationalise Tax Policies: Adjust tax structures to discourage illicit trade while encouraging corporate documentation and investment.
• Broaden the Tax Base: Focus on bringing the undocumented sector into the formal economy rather than placing additional tax burdens solely on existing taxpayers.
Rising Operational Challenges Threaten Business Competitiveness
Beyond illicit trade, the delegation pointed out that Pakistan’s broader business community is currently facing a multitude of systemic challenges. High taxation, elevated financing costs, increasing compliance requirements, and various provincial levies are altogether damaging competitiveness and discouraging future investment.
Furthermore, businesses expressed deep concern regarding the accelerating migration of skilled professionals, noting that local companies are finding it increasingly difficult to retain experienced human resources.
Government Pledges Balance Between Revenue and Economic Growth
Responding to these grievances, Federal Minister Jam Kamal Khan acknowledged the industry’s concerns and stressed the vital importance of maintaining a balance between revenue generation and economic growth.
“The formal sector should be encouraged and facilitated, as it remains the backbone of economic activity, investment, and employment generation.”
The Minister added that sustainable revenue growth will ultimately come from expanding the tax net and pulling undocumented economic activity into the formal framework. He observed that Pakistan possesses immense economic potential due to its strategic geographic location, meaning the state must actively create a business-friendly environment capable of attracting local and foreign investment.
Global Competition for Investment
“The world is actively competing for capital. Pakistan must ensure that its policies promote investor confidence, facilitate business growth, and strengthen the country’s attractiveness as a prime investment destination,” Khan noted.
The Minister concluded by stating that the Prime Minister and the economic team are actively engaging with stakeholders and remain highly receptive to constructive recommendations from the private sector. He formally invited PTC to submit its proposals regarding taxation and enforcement so they could be taken up with the relevant authorities before the final budget session.
