Experts urge to curb illicit tobacco trade for economic recovery

The illegal trade of tobacco products poses a serious threat to public health and fiscal stability, especially in the wake of the Covid-19 pandemic. Experts have called for effective measures to combat the illicit tobacco trade and boost the economic recovery of Pakistan.

One of the main challenges faced by the government of Pakistan is the low tax-to-GDP ratio, which hampers its ability to provide essential public services and invest in development. According to the World Bank, Pakistan’s tax-to-GDP ratio was 9.9% in 2023, one of the lowest in the world.

Tobacco taxation is a proven policy tool to reduce tobacco consumption and generate revenue for health and development. However, the illicit tobacco trade undermines the effectiveness of tobacco tax policy and deprives the government of much-needed revenue. According to the Federal Board of Revenue, the illicit tobacco trade causes an annual loss of Rs 40 billion to the national exchequer.

The illicit tobacco trade also creates unfair competition for the legitimate tobacco industry, which contributes significantly to the economy of Pakistan. According to the Pakistan Tobacco Board, the tobacco sector provides direct and indirect employment to over 1.5 million people and contributes Rs 114 billion in taxes and duties annually.

Illicit tobacco trade fuels health and social problems

The illicit tobacco trade not only harms the economy, but also poses a serious threat to public health and social welfare. The illegal tobacco products are often cheaper, more accessible, and less regulated than the legal ones, which increases their appeal to vulnerable groups, especially the youth and the poor.

The consumption of illicit tobacco products exposes the users to higher health risks, as they may contain higher levels of tar, nicotine, and other harmful substances. The illicit tobacco trade also undermines the implementation of tobacco control measures, such as health warnings, ingredients disclosure, and plain packaging, which are aimed at reducing the demand for tobacco products.

Moreover, the illicit tobacco trade is often linked to other forms of crime, such as smuggling, money laundering, corruption, and terrorism. The illegal tobacco networks thrive in and contribute to weak governance contexts, which erode the rule of law and public trust in the authorities.

Experts recommend multi-pronged approach to combat illicit tobacco trade

To address the multifaceted problem of illicit tobacco trade, experts have recommended a comprehensive and coordinated approach that involves all relevant stakeholders, such as the government, the civil society, the media, the academia, and the international community.

Some of the key recommendations include:

  • Strengthening the legal and institutional framework to prevent, detect, and prosecute the illicit tobacco trade, in line with the WHO Framework Convention on Tobacco Control and its Protocol to Eliminate Illicit Trade in Tobacco Products.
  • Enhancing the capacity and coordination of the law enforcement agencies, such as the customs, the police, and the judiciary, to effectively combat the illicit tobacco trade and enforce the tobacco control laws.
  • Implementing a robust and secure track and trace system for tobacco products, which would enable the verification of the origin, destination, and movement of the tobacco products along the supply chain.
  • Increasing the public awareness and engagement on the harms and consequences of the illicit tobacco trade, and mobilizing the support and cooperation of the public and the media to report and denounce the illegal tobacco activities.
  • Harmonizing and rationalizing the tobacco tax policy and administration, which would reduce the price and tax gaps between the legal and illegal tobacco products, and increase the revenue and health benefits of tobacco taxation.
  • Promoting regional and international cooperation and information exchange on the illicit tobacco trade, and supporting the implementation of the global and regional initiatives and mechanisms to combat the illicit tobacco trade.

By implementing these measures, the experts hope that the government of Pakistan can effectively curb the illicit tobacco trade and enhance the economic recovery and public health of the country.

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