Illicit cigarette trade in Pakistan causes an estimated annual revenue loss of about Rs350 billion, with nearly 45 to 47 billion cigarettes sold without tax, Federal Minister for Commerce Jam Kamal Khan was told during a meeting with a delegation led by Philip Morris International’s Marco Mariotti, according to a statement issued on Thursday.

The delegation highlighted that undocumented production and misuse of contracts allow informal players to access raw materials, creating an uneven playing field for the formal sector. Structural issues in the tobacco supply chain include procurement of tobacco leaf, under?reporting of production and weak traceability mechanisms.

Participants noted that a limited number of actors benefit disproportionately from the undocumented segment, while formal businesses face compliance and cost pressures. The issue extends beyond taxation to undocumented income, money laundering and broader economic distortions.

A key theme was the need for stronger enforcement. Laws, tax stamp systems and regulations exist, but implementation remains inconsistent and requires coordinated action by federal and provincial authorities. The Pakistan Tobacco Board’s enforcement capacity is limited, and the meeting stressed the need to restructure and strengthen the board for better documentation and monitoring.

The meeting also reviewed policy challenges arising from Pakistan’s International Monetary Fund (IMF) commitments, including the gradual removal of import restrictions, which may complicate efforts to control key inputs for cigarette manufacturing.