$1bn revenue loss: Smuggled cigarettes termed biggest challenges

ISLAMABAD: Kingsley Wheaton, Chief Corporate Officer, British American Tobacco (BAT) said that only rationalization of excise duty on cigarettes would not work to control growing share of 54 percent of illicit cigarettes in market, but enforcement and regulatory regime needs to be further strengthened in Pakistan.

Talking to a selected group of journalists here on Wednesday, the CCO BAT stated that non-duty paid and smuggled cigarettes are the biggest challenges for the legitimate industry. This has resulted in revenue loss of approximately one billion dollars.

The excise shocks like the 200 percent increase in FED on cigarettes would boost government revenue in short-term, but it would reduce government revenues in the long term as happened in Pakistan.

Since increase of 200 percent excise duty on cigarettes in 2022-23, illicit volume has increased exponentially, demonstrating a shift from the formal sector to the illicit sector which has deprived the government of invaluable revenue at this trying juncture.

Out of 80 billion sticks consumed in Pakistan, the share of the legitimate industry is likely to be reduced to 30 billion sticks in 2026-27. A sustainable excise model for tobacco products would achieve the desired results.

The lack of enforcement after implementation of the track and trace system at tobacco factories also contributed in influx of non-duty paid smuggled cigarettes.

We have also discussed the issue with the honourable Finance Minister, who acknowledged that the issue of illicit trade is not only limited to tobacco sector, but other industries are also facing this issue. The meeting with the Finance Minister was very productive and positive.

The issue of illicit trade of cigarettes is not limited to Pakistan, but even advanced countries like Australia are facing the same problem, Kingsley Wheaton said.

He pointed out that last year excise duty was raised on the import of vaping products which resulted in stopping of the import of the product, causing revenue loss of Rs1 billion. The issue has been discussed with the Finance Minister as well as Chairman Federal Board of Revenue (FBR), who will look into the resolution of the issue.

He stated that Pakistan Tobacco Company Limited (PTC) has launched Omni™, a pioneering global platform designed to drive awareness and informed discussions around Tobacco Harm Reduction (THR). This platform aligns with BAT Group’s commitment to building A Smokeless World through science-backed innovations.

Originally unveiled at BAT’s inaugural Transformation Forum in London in September 2024, Omni™ serves as an evidence-based, accessible, and dynamic platform that showcases how innovation and scientific research can contribute to a reduction in smoking-related disease.

He emphasised the company’s ongoing transformation from a single-category tobacco company to a multi-category consumer goods business. “Since we launched our tobacco-free oral nicotine product, Velo, in 2019, we have offered adult smokers in Pakistan with a choice of compelling, innovative alternatives to cigarettes.

Our company’s transformation is about providing adult smokers and traditional tobacco consumers with quality alternative products with reduced risk profiles compared with continued smoking,“ he stated.

Kingsley Wheaton, BAT’s Chief Corporate Officer, stated Tobacco Harm Reduction – encouraging smokers who would otherwise continue to smoke to switch completely to less risky alternatives is the fastest route to achieving a Smokeless World.

We are committed to working with all global stakeholders to make this a reality. Omni™ is more than a resource. Omni™ is a platform for essential dialogue, a call to action, and a commitment to scientific integrity and public health.“

He said that the launch of Omni™ marks a significant milestone in PTC’s and BAT’s commitment to advancing science-based harm reduction strategies. By fostering transparency, accessibility, and collaboration, Omni™ aims to equip policymakers, researchers, and other relevant stakeholders with the information needed to drive meaningful change.

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