Pakistan's Commerce Minister Jam Kamal Khan stated on Wednesday that the government will examine proposals from the tobacco industry regarding taxation and illicit trade, ahead of the federal budget. The move aims to broaden the tax base and strengthen the country's documented economy.
Discussions with Tobacco Industry
The discussions between Minister Khan and representatives of the Pakistan Tobacco Company (PTC) took place as Pakistan prepares to unveil its federal budget for the next fiscal year on June 12. The government is seeking to raise revenues under a $7 billion International Monetary Fund (IMF) program.
Expanding the tax net and reducing undocumented economic activity have remained key priorities for successive governments seeking to improve public finances and attract investment.
Challenges in Tobacco Sector
The tobacco sector has long been at the center of debates over taxation and illicit trade in Pakistan. Manufacturers argue that illegal cigarette sales undermine government revenue collection and create an uneven playing field for tax-compliant businesses. Meanwhile, public health advocates have supported higher tobacco taxes as a way to discourage smoking.
"We will carefully examine the industry's proposals and continue working with stakeholders to promote a business-friendly environment, expand the tax net, curb illicit trade, and attract investment to Pakistan," Khan said in a statement posted on X.
Focus on Documented Economy
The minister said he had discussed industry challenges, taxation, enforcement against illicit trade, and measures to strengthen Pakistan's documented economy during the meeting. "A strong formal sector is essential for investment, exports, employment, and sustainable economic growth," Khan added.
Pakistan has repeatedly identified undocumented economic activity as a major challenge to revenue collection. Authorities argue that bringing more businesses into the formal economy is necessary to improve compliance and reduce pressure on existing taxpayers.
Budget Outlook
The federal budget is likely to outline new revenue measures as the government seeks to balance fiscal consolidation with economic growth while meeting commitments under its IMF-backed reform program. The upcoming budget is expected to introduce policies that address both taxation and illicit trade in the tobacco sector.
