ISLAMABAD: The International Monetary Fund (IMF) has expressed serious concern over widespread tax evasion in Pakistan’s cigarette sector, revealing that nearly 50% of the market is dominated by illicit and untaxed cigarettes, according to ARY News, citing sources.
The issue was highlighted during recent discussions between the IMF delegation and Pakistani officials as part of negotiations to unlock the next $1 billion loan installment under the ongoing financial programme.
Sources reported that the IMF urged Pakistan to tighten regulation of the illegal tobacco trade. During a detailed session with the Federal Board of Revenue (FBR), both sides also reviewed a market study on the illicit cigarette trade and discussed the effectiveness of the Track and Trace system.
The IMF praised FBR’s Track and Trace mechanism, acknowledging its role in curbing tax evasion in key industries such as sugar, cement, fertilizer, and tobacco. The system has improved transparency in tax collection and helped reduce counterfeit production.
According to sources, there was also discussion on extending the Track and Trace system to six more industries.
Additionally, the IMF expressed dissatisfaction with tax compliance in Pakistan’s retail sector and emphasized the need to enhance revenue collection from this segment.
To bridge revenue gaps, proposals for the next federal budget were discussed, including the introduction of a new fixed tax scheme to bring more retailers into the tax net.
