Philip Morris Pakistan warns of illicit cigarette surge

The regulated tobacco sector in Pakistan is sounding the alarm over the increasing presence of illicit cigarettes in the market, which is posing a threat to both government revenue and public health. Philip Morris Pakistan (PMP) highlighted the detrimental impact of cheap illicit cigarettes on the legitimate industry, leading to an 86 percent decrease in total income for the company during the fiscal period of January to December 2023.

The surge in illicit cigarettes, particularly in regions like Khyber Pakhtunkhwa (KPK) and Azad Jammu & Kashmir (AJ&K), has been attributed to the widening price gap between legal and illicit products. This gap has been further exacerbated by high taxes on regulated cigarettes, making illicit alternatives more appealing to consumers.

Despite efforts to combat the illicit tobacco trade through measures like tax stamps and the track & trace system, the implementation has been lacking, with counterfeit cigarette packs openly available in markets. The increase in federal excise duty (FED) in February '23 has further fueled the illicit market, with illicit cigarettes now comprising 63 percent of the total market share.

Andleeb Uroos Ahmed of PMP emphasized the need for a comprehensive approach to tackle the issue, warning that further tax hikes without effective enforcement would not only impact government revenue but also undermine public health objectives by driving consumers towards illicit alternatives.

The call for stronger enforcement of anti-tobacco laws in Pakistan comes as the regulated tobacco sector faces significant challenges from the proliferation of illicit cigarettes. Addressing the issue of illicit tobacco trade is crucial not only for safeguarding government revenue but also for protecting public health from the risks associated with unregulated and untaxed tobacco products.