The 300 Billion Rupee Tax Evasion: How Illegal Cigarettes Are Deepening Pakistan’s Economic Crisis?

Pakistan Economic Crisis: Pakistan is currently facing its worst economic phase with declining economic growth and rising inflation. Meanwhile, the illegal cigarette trades are causing more revenue stress on top of other economic woes. According to a recent media report, due to excessive tax evasion in the tobacco sector, the nation’s treasury is losing over 300 billion Pakistani rupees every year.

A report in ‘Express Tribune’ highlighted that the illegal cigarette trade has crippled the state’s revenue while the government is struggling to reduce the budget deficit. 

Nation Struggles To Meet Tax Collection Target 

Pakistan's Federal Board of Revenue (FBR) failed miserably to achieve its monthly target for March, which was set at 1,367 billion Pakistani rupees. The tax body collected 1,182 billion Pakistani rupees, short by 185 billion Pakistani rupees. 

The lower tax collection directly impacts the country's development, forcing the government to cut budgets for vital projects like electricity, water, and infrastructure.

Smugglers Win

According to the report, the government has no concrete plan to curb the illegal cigarette trading. The monitoring system is extremely weak, and the 'track-and-trace' system that was implemented is also proving to be ineffective on the ground.

As a result, illegal cigarette production and smuggling thrive. Shockingly, instead of curbing evasion, the administration is increasing the tax burden on honest taxpayers, imbalancing the socio-economic balance in the nation. 

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Public Debt Increases

Pakistan's devastation can be gauged from the fact that the country's total public debt has increased from Rs 71 trillion to Rs 80.5 trillion in one year.  This simply means that Pakistan is borrowing more to meet its day-to-day expenses. 

If this tax evasion in the tobacco sector is stopped, Pakistan could find some relief from this debt trap and raise funds for public welfare. Currently, the neighbouring country's economic situation appears to be falling into a state of deep distress.

(With inputs from jagran.com)