Pakistan’s documented tobacco industry contributed a record Rs357 billion in federal taxes during the fiscal year 2025-26, an increase of Rs41 billion from the previous year, as tougher enforcement against tax evasion and illegal cigarette trade boosted government revenues.
According to Fair Trade in Tobacco (FTT), the documented sector paid Rs357 billion in federal excise duty, general sales tax and income tax during FY26, compared with Rs315 billion collected in FY25.
The industry body said the rise in tax receipts reflected stricter action by the Federal Board of Revenue (FBR) and other authorities against illicit cigarette production, smuggling and the sale of unstamped tobacco products.
Taxes collected through federal excise duty and sales tax alone climbed to Rs329 billion during the year, up from Rs284 billion in the previous fiscal year.
FTT Chairman Muhammad Amin said several enforcement measures helped improve compliance across the sector. These included deploying officials at Green Leaf Threshing Units, enforcing advance tax requirements, taking action against undeclared cigarette production and carrying out provincial operations against unstamped cigarette packs.
Among the country’s leading tobacco companies, Pakistan Tobacco Company remained the largest taxpayer, contributing Rs260.7 billion during FY26, up from Rs222 billion a year earlier. Philip Morris Pakistan paid around Rs52.2 billion in taxes over the same period.
Amin pointed to Khyber Pakhtunkhwa as a key area in the fight against illegal cigarette manufacturing, saying the province accounts for a significant share of illicit production and diversion of tobacco products in Pakistan.
Despite the improvement in documented tax collections, FTT said the illegal cigarette market remains a major challenge. It estimated that illicit and smuggled cigarette brands continue to account for a sizeable share of domestic sales, depriving the national exchequer of nearly Rs400 billion in tax revenue each year.
The organisation also urged authorities to examine financial flows linked to cross-border cigarette smuggling, arguing that undocumented transactions raise concerns that extend beyond tax evasion.
Looking ahead, FTT called on the government to continue its enforcement campaign while focusing on bringing illegal manufacturers, distributors and retailers into the formal tax net instead of placing additional tax burdens on compliant businesses.
According to Amin, tighter oversight of tobacco processing units, factories, transport routes, warehouses and retail outlets, backed by closer coordination between provincial governments and the FBR, could increase annual tax revenues from the tobacco sector to between Rs575 billion and Rs600 billion in the coming years.
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