The federal government’s failure to expand its tax net and curb tax evasion has resulted in a tax shortfall that may widen to around Rs 400 billion by the end of December.

According to reports, this tax shortfall could further increase by Rs 50–60 billion in December alone, following the Federal Board of Revenue’s (FBR) failure to meet its target for the July–November period which fell short by Rs 341 billion despite imposing record taxes exceeding Rs 1.5 trillion in the budget.

This alarming decline underscores the growing financial strain on Pakistan’s economy. Experts warn of an urgent need for collective responsibility to expedite measures against tax evasion, particularly in the tobacco sector, which remains a significant source of revenue leakage.

Minister of State for Finance and Revenue, Ali Pervaiz Malik, stated during an event hosted by the Institute of Public Opinion and Research (IPOR) that the FBR has been directed to control evasion estimated at Rs300 billion to Rs350 billion within the illicit cigarette trade. Notably, these figures do not account for smuggled cigarettes, which could inflate the total by two to three times.

According to an IPOR report, out of 264 surveyed cigarette brands, only 19 fully complied with Track and Trace (TTS) regime requirements, which mandate TTS stamps. Non-compliant brands accounted for 58% of the market, comprising locally manufactured duty-not-paid (DNP) brands (65%). They smuggled brands (35%), with violations ranging from missing TTS stamps to non-adherence to pricing or health warning regulations.

Moreover, the excessive consumption of cigarettes among youth is a pressing concern. The affordability of cheap, illicit cigarettes significantly contributes to this issue, making prevention efforts increasingly challenging. However, these risks can be minimised with strong enforcement of anti-smuggling laws and transparent monitoring.