Shams ul Nisa

Pakistan Tobacco Company Limited (PTC) has urged the government to adopt a balanced fiscal strategy and tighten enforcement as it prepares the Budget 2025-2026, reports WealthPK.

Additionally, the company warned that unchecked black-market activity was undermining the formal sector, costing the nation billions in lost revenue, threatening jobs, and hindering sustainable economic growth.

Pakistan’s economy is recovering, with the IMF projecting 3.0% GDP growth in FY25 and 4.0% in FY26, fueled by fiscal discipline and declining inflation. While the outlook is positive, illicit trade remains a major challenge, diverting vital revenues needed for public services and infrastructure.

Furthermore, smuggling, tax-evasion, and counterfeits dominate more than half of the cigarette market, harming government revenue, public health, formal sector jobs, and businesses like PTC.

Despite facing a challenging market environment, PTC has shown a strong performance in 1QCY25, posting a 22% year-on-year profit increase, driven by strategic investments, efficiency, and innovation. The company earned $22.2 million in export revenue and saw a robust growth in its modern oral product, VELO™, reflecting its commitment to reduced-risk alternatives.

However, the domestic cigarette sales dropped 7% due to the growing impact of illicit trade, and while the gross turnover stood at Rs79.9 billion, collections from excise duties and sales tax declined, signaling market shifts that continue to challenge the formal sector.

Therefore, PTC has emphasized that the upcoming budget must carefully balance revenue goals with the sustainability of the formal tobacco sector. The company warned that excessive taxation, aimed at curbing smoking and boosting revenue, had instead fueled the illegal market.

Pakistan has surpassed the "optimal tax point," leading the consumers to turn to illicit products. Therefore, PTC has called for a balanced fiscal policy to stabilize revenues, safeguard jobs, and promote legal compliance by keeping legitimate products affordable.

PTC’s focus on reduced-risk products, exports, and operational efficiency aligns with the government goals. The company believes balanced taxation and stronger enforcement could boost tax revenues, create jobs, and foster a safer, more innovative market.

The company has called for a tech-driven enforcement strategy, including digital track-and-trace, stricter penalties, better tax oversight, and modernized border controls, with a focus on vulnerable areas.

The company warned that without a balanced fiscal approach and strong enforcement, illicit trade would harm the economy. It called for evidence-based policymaking to protect businesses and ensure steady revenue. With decisive, targeted action, Pakistan has the opportunity to curb illicit trade, strengthen its formal economy, and foster an inclusive, long-term growth.

Credit: INP-WealthPk