BAT urges no tobacco tax hike in Pakistan’s upcoming federal budget. British American Tobacco’s Simon Trussler delivered the warning during a journalist interaction. The Group Head of International Trade and Fiscal Affairs argued for tax stability. Consumers can no longer absorb sudden excise increases. Recent stability in cigarette taxation produced positive results. Legal sales volumes started improving. Policymakers should prioritize predictability over abrupt fiscal changes.

The illicit cigarette market in Pakistan has reached alarming levels. Trussler claimed illegal cigarettes now account for around 55 percent of consumption. Widespread tax evasion causes significant revenue leakage. Sharp tax increases between 2022 and 2023 fueled this illicit trade. Independent analyses suggest illegal cigarettes now represent the majority of consumption. In 2023-24, approximately 58 percent of cigarettes consumed were illicit. Eighty-five percent of those came from domestic production.

BAT urges no tobacco tax hike because past policies failed. An Oxford Economics report confirmed the grim assessment. Pakistan’s cigarette fiscal policy neither increased tax revenue nor reduced overall consumption. Total cigarette consumption stayed stable at roughly 80 billion sticks annually since 2012. Rapid tax increases made legal products unaffordable. Consumers switched to cheaper illicit alternatives instead of quitting. The price gap between legal and illegal cigarettes widened dramatically.

Trussler challenged claims that taxation does not encourage illicit trade. International evidence shows a strong link between cigarette affordability and illegal market growth. More than 80 percent of cigarette price increases in Pakistan came directly from higher taxes. Pakistan ranks 173rd out of 184 countries in pre-tax industry margins. Legitimate manufacturers struggle to operate profitably. Enforcement remains essential but insufficient alone.