The annual tobacco tax campaign has returned at exactly the time when Pakistan’s budget machinery is most exposed to external pressure.
On May 7, 2026, the Sustainable Development Policy Institute hosted a policy dialogue in Islamabad calling for higher tobacco taxes in Budget 2026–27, elimination of the two-tier cigarette tax structure, and automatic increases in excise duties above inflation and economic growth. The seminar also argued that Pakistan remains below the 70 percent tobacco tax benchmark set by the WHO Framework Convention on Tobacco Control. The timing was not accidental. It landed in the budget window, when tax proposals compete for bureaucratic and political attention.
There is nothing wrong with civil society advocating public health. Pakistan needs a serious health policy. But there is something deeply incomplete about a yearly advocacy cycle that becomes loudest in April and May, presses the government to tax the legal cigarette industry harder, and treats the illegal cigarette mafia as a side note rather than the central enforcement crisis. Even the SDPI report, while noting that taxation alone would not work without enforcement, framed the broader policy message around higher taxation, single-tier reform, and targeted measures against popular cigarette brands. The illegal market appeared, but it did not dominate the agenda, which is precisely the problem.
This pattern is not limited to SDPI.
SPARC has repeatedly run tobacco tax advocacy during the budget period. In May 2024, APP reported that SPARC organized a policy dialogue on tobacco taxation, during which speakers called for an immediate increase in tobacco taxation for FY 2024-25. The same report named Malik Imran Ahmed, country head of the Campaign for Tobacco-Free Kids, as a speaker. In May 2025, SPARC and the Social Policy and Development Center launched a cigarette tax simulation model proposing a Rs. 39 per pack FED increase, claiming it could generate Rs. 67.4 billion in additional revenue.
The foreign-funded architecture behind parts of this activism is not hidden. The Tobacco Control Grants Program states that Bloomberg Philanthropies has committed more than US$1.58 billion since 2005 to reduce tobacco use in low- and middle-income countries, and that the grants program is jointly managed by Vital Strategies and the Campaign for Tobacco-Free Kids. Bloomberg Philanthropies itself says its initiative supports measures such as tobacco tax increases, graphic warnings, advertising bans, and mass media campaigns, and that it announced an additional US$420 million commitment in 2023.
Local linkages are also documented.
SPARC’s 2021 annual report states that, with the support of the Campaign for Tobacco-Free Kids in Islamabad and Karachi, it advocated reducing tobacco use among youth and that its efforts contributed to the government not decreasing cigarette taxes in FY2021-22.
SPDC’s 2021–22 annual report records that a Pakistan tobacco factsheet was launched in Islamabad by SPDC, WHO Pakistan, Campaign for Tobacco-Free Kids, The Union, and Vital Strategies, with government officials, parliamentarians, media, academia, and civil society in attendance. Blue Veins, a Peshawar-based organization, lists a public health project on its own website with “Donor: Vital Strategies,” focused on tobacco control, capacity building, and multistakeholder engagement.
The question is not whether these organizations may speak. They may. The question is whether Pakistan should allow foreign-funded policy pressure to shape tobacco taxation while the illegal cigarette economy continues to rob the state on an industrial scale.
FBR Chairman Rashid Mahmood Langrial disclosed in May 2025 that the tobacco sector alone faced annual tax evasion of around Rs. 300 billion and that only one out of every ten trucks carrying smuggled cigarettes was being confiscated due to weak enforcement capacity. Other reports placed the broader tobacco and poultry tax evasion figure at around Rs. 400 billion.
The commercial scale behind that tax theft is even more disturbing.
A Rs. 300 billion to Rs. 400 billion annual tax gap is not the full size of the illegal trade. It is only the tax that the state does not receive. The actual black-market ecosystem, including manufacturing, smuggling, warehousing, transport, retail margins, protection payments, and cash recycling, could easily be several times larger. That means Pakistan may be dealing not merely with lost excise revenue, but with a vast illegal cash economy whose final destinations remain unclear. The donor-funded activists who speak so confidently about tax hikes rarely apply the same urgency to this question: where does this money go?
The fiscal record also weakens the simplistic “raise taxes, and revenue will rise” argument. Pakistan Today reported that FED collection from cigarettes fell to Rs. 225.5 billion in FY2024–25 from Rs. 235 billion a year earlier, despite a 200 percent increase in the duty rate; the cigarette sector’s share of total FED also fell from 40.7 percent to 29.4 percent. That is what happens when tax policy runs ahead of enforcement. The legal market shrinks, the illegal market expands, and the state congratulates itself for policy virtue while losing money in practice.
The government deserves credit for starting to confront this reality. In November 2025, the FBR said Pakistan was losing nearly Rs. 250 billion to Rs. 300 billion annually from illicit cigarette trade and unlawful manufacturing, and that the prime minister had issued clear directions to curb the trade and enforce tax laws.
The same enforcement cycle resulted in raids in Khyber Pakhtunkhwa, including the recovery of non-duty-paid and non-TTS cigarettes from an undeclared godown and the action against a manufacturer found involved in manufacturing and removing non-duty-paid cigarettes.
This is the right direction, and it must continue. If Pakistan wants to recover another billion dollars in tobacco taxes annually, it cannot rely solely on budget seminars and excise tables. It must dismantle illegal cigarette factories, seize non-duty-paid stock, enforce Track and Trace at the retail level, punish transport networks, and pursue the political and administrative protectors of this trade. A tax increase without enforcement is not reform; it is an invitation for consumers to switch to cheaper, untaxed brands.
The foreign-funded NGO ecosystem should also face a transparency test.
In January 2025, Dawn reported that the Ministry of Interior ordered the operations of Campaign for Tobacco-Free Kids and Vital Strategies to halt, directed the State Bank to freeze accounts linked to them, and said the organizations were not registered with the Ministry of Interior or the Economic Affairs Division. That report does not invalidate every health argument these groups make. Still, it does make one point unavoidable: policy influence funded from abroad must be transparent, lawful, and subject to Pakistani oversight.
Pakistan should not make a tobacco policy to please legal manufacturers. It should not make tobacco policy to please foreign-funded activists either. It should make policy in the national interest. That means reducing smoking through enforceable rules, collecting taxes from the whole market, and preventing the illegal cigarette mafia from using each tax hike as a business opportunity.
For foreign investors, this is not a small sectoral dispute. It is a signal about the wider business environment. If lawful companies pay hundreds of billions while illegal operators violate tax, price, packaging, and traceability rules with impunity, Pakistan tells investors that compliance is a disadvantage. No serious economy can afford that message. The government has finally begun to act against the illegal cigarette mafia. It should not stop now, and it should not let seasonal, donor-backed pressure distract it from the harder task: recovering the market from illegality.