As political turmoil continues, the finance minister is actively engaging with businesses, emphasizing that the only way out of the current economic crisis is to tax those who are currently untaxed, including individuals who pay taxes but underreport their income.
Revenue generation faces two main challenges. First, many people live lavishly without paying any taxes. Second, the prevalence of illegal trade and the undocumented sector shifts its tax burden by underreporting production or trading activities.
The government has struggled to address these issues effectively. Taxes evaded by beverage companies, sugar mills, cement producers, and illicit tobacco companies are alarmingly high.
Recent estimates reveal that illicit trade costs Pakistan over 956 billion rupees annually, with sectors such as real estate, pharmaceuticals, tobacco, tyres and lubricants, and tea contributing significantly.
The illicit cigarette market alone has surged to a staggering 63% of total consumption, up from around 40% a few years ago. This has resulted in a loss of over Rs 310 billion in tax revenue.
Governments and law enforcement agencies have long acknowledged the problem. Recently, the Director General of the Inter-Services Public Relations (DG ISPR) reported that 50-60% of cigarettes sold in Pakistan are illegal, leading to substantial economic losses.
Fawad Khan, spokesperson for Mustehkam Pakistan, has called for immediate government intervention to tackle illicit trade. He stated, “The government should take swift and decisive action against illicit trade to boost revenue and lessen the tax burden on ordinary citizens.”
“With the budget already in effect for a month, the continued visibility of illegal items in markets highlights the challenges that remain,” he added.
Khan emphasized that the government must prioritize robust enforcement mechanisms, including digital monitoring systems, to curb the flow of illegal goods. Such measures will not only increase revenue but also protect the health and well-being of the population.
