The FBR has reported a significant increase in tax collection from Pakistan’s tobacco industry during fiscal year 2025-26. According to official figures, the Federal Board of Revenue collected Rs. 329 billion through Federal Excise Duty (FED) and General Sales Tax (GST), up by Rs. 45 billion from the Rs. 284 billion collected in the previous fiscal year.
When income tax is included, the FBR collected a total of Rs. 357 billion from the tobacco sector during FY2025-26. This is higher than the Rs. 315 billion recorded in FY2024-25. Officials said the increase reflects improved tax enforcement despite the continued challenge of illegal cigarette sales.
The Pakistan Tobacco Company remained the largest taxpayer in the industry. It contributed Rs. 260.7 billion during the fiscal year, compared with Rs. 222 billion in the previous year. Philip Morris Pakistan ranked second, paying around Rs. 52.2 billion in taxes during FY2025-26.
According to FBR officials, stronger enforcement measures played a major role in increasing tax revenue. These steps included deploying paramilitary personnel at Green Leaf Threshing Units, improving the collection of advance withholding taxes, taking action against the illegal cigarette trade, and supporting provincial operations against unstamped cigarette packs.
Despite these efforts, the illegal tobacco market continues to affect government revenue. Officials estimate that smuggled and untaxed cigarettes still account for nearly 45 percent of the country’s cigarette market. This results in an estimated annual tax loss of around Rs. 300 billion.
Authorities also estimate that the illegal cigarette market itself is worth nearly Rs. 300 billion. The large size of this market remains one of the biggest challenges for tax collection and enforcement.
Pakistan’s annual cigarette consumption has remained stable at around 81 billion sticks. Officials said a sharp increase in Federal Excise Duty rates during FY2022-23 raised the prices of legally taxed cigarettes. As a result, many consumers shifted toward cheaper illegal products.
Although the government has kept Federal Excise Duty rates unchanged in recent budgets, tax collections have continued to improve. However, officials say illegal cigarette sales still represent a major share of the market and continue to reduce potential government revenue.
The FBR plans to expand its enforcement efforts in the coming years. The authority intends to strengthen monitoring at Green Leaf Threshing Units and increase coordination with provincial governments to stop the sale of unstamped cigarette packs.
Officials believe these additional measures could significantly boost future tax collections from the tobacco sector. According to estimates, annual revenue could increase to between Rs. 575 billion and Rs. 600 billion if illegal cigarette sales are reduced and tax compliance continues to improve.
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The latest figures highlight the government’s focus on improving tax collection while addressing the long-standing issue of illicit tobacco trade. The FBR says stronger enforcement and better coordination will remain key priorities to protect revenue and improve compliance across the tobacco industry.
