Islamabad, March 25: The tobacco shadow economy in Pakistan requires a permanent, year-round enforcement model to curb illegal trade and protect public revenue, a senior official of ACT Alliance Pakistan said during a webinar in Islamabad.
Mubashir Akram, Country Director of ACT Alliance Pakistan, said the illegal tobacco trade has evolved into a major governance and economic challenge, warning that it undermines lawful businesses, weakens state institutions and reduces tax collection.
Scale of the issue
Akram said estimates from tax authorities and public reporting suggest annual tax evasion in the tobacco sector is around Rs400 billion. He added that the broader illegal economy may be significantly larger when factoring in undeclared production, transport, storage and retail distribution.
He noted that widespread availability of non-compliant cigarette brands in the market reflects gaps in enforcement and regulatory oversight.
Enforcement efforts and gaps
While acknowledging recent government actions, including seizures of non-duty-paid tobacco and enforcement operations, Akram said these measures need to be sustained.
He said periodic crackdowns alone are insufficient and called for continuous enforcement to ensure illegal trade becomes consistently costly for those involved.
Role of institutions and policy
Akram stressed that enforcement must be supported by stronger coordination between institutions, improved monitoring systems and effective implementation of track-and-trace mechanisms.
He also cautioned that increasing taxes without controlling illegal supply chains could push consumers toward untaxed products, reducing the effectiveness of fiscal policy.
Call for broader collaboration
He urged greater involvement from academia, civil society and the media to address the issue, calling for more research, public awareness and policy debate on the illegal economy.
Akram said a coordinated approach involving multiple stakeholders is necessary to reduce the space for illegal trade and strengthen governance.
Need for structural response
He concluded that Pakistan should adopt a long-term strategy focused on retail compliance, input controls and institutional integrity to counter the illegal tobacco market.
According to Akram, protecting the legal economy is essential for improving revenue collection and restoring public confidence in the rule of law.
