Pakistan to Assess Tobacco Industry Tax and Illicit Trade Proposals Ahead of Budget

ISLAMABAD: Pakistan’s commerce minister announced that the government will review proposals from the tobacco industry concerning taxation and illicit trade as it prepares the upcoming federal budget, aiming to broaden the tax base and strengthen the documented economy.

The meeting between Commerce Minister Jam Kamal Khan and representatives of Pakistan Tobacco Company (PTC) occurs ahead of the budget slated for unveiling on June 12, under a $7 billion International Monetary Fund (IMF) program. Expanding the tax net and curbing undocumented economic activity remain top priorities for successive administrations seeking to improve public finances and attract investment.

The tobacco sector has long been a focal point in debates over taxation and illicit trade in Pakistan. Manufacturers contend that illegal cigarette sales erode government revenues and create an uneven playing field for compliant businesses, while public‑health advocates support higher taxes as a deterrent to smoking.

“We will carefully examine the industry’s proposals and continue working with stakeholders to promote a business‑friendly environment, expand the tax net, curb illicit trade, and attract investment to Pakistan,” Khan said in a statement posted on X.

The minister said the discussion covered industry challenges, taxation, enforcement against illicit trade, and measures to strengthen Pakistan’s documented economy.

“A strong formal sector is essential for investment, exports, employment, and sustainable economic growth,” Khan added.

Pakistan repeatedly identifies undocumented economic activity as a major obstacle to revenue collection, arguing that incorporating more businesses into the formal economy is crucial for improving compliance and easing the burden on existing taxpayers.

The forthcoming federal budget is expected to introduce new revenue measures as the government seeks to balance fiscal consolidation with economic growth while meeting its IMF‑backed reform commitments.

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