Govt reviews tobacco sector policies amid excise, illicit trade concerns

February 12, 2026 (MLN): The government is reviewing tobacco sector policies, including excise measures and enforcement actions, to address illicit trade and enhance export competitiveness while maintaining fiscal discipline.

Federal Minister for Finance and Revenue Senator Muhammad Aurangzeb made the remarks during a meeting at the Finance Division with a delegation of British American Tobacco (BAT) led by Ms. Pascale Meulemeester, Regional Director for Asia Pacific, Middle East & Africa, along with senior executives of BAT and Pakistan Tobacco Company (PTC).

During the meeting, the minister emphasized that Pakistan’s ongoing structural reform agenda, led by the prime minister, aims to break historical boom-and-bust cycles through fiscal discipline, broadening of the tax base, and stronger enforcement.

He stressed that fiscal sustainability requires equitable taxation, improved compliance across sectors, and decisive action against leakages and illicit activities, according to a press release issued.

Highlighting progress in tax administration, Finance Minister Aurangzeb said reforms in people, processes, and technology have strengthened enforcement through AI-led customer relationship management systems, AI-based production monitoring, and track-and-trace mechanisms. 

He noted that enhanced enforcement in sectors including sugar, cement, tobacco, textiles, and beverages has led to measurable gains in compliance and revenue collection.

Officials also briefed the delegation on enforcement operations against illicit cigarette manufacturing and smuggling, sharing that record seizures were made this year through coordinated actions involving customs, inland revenue, provincial authorities, and dedicated enforcement units targeting illegal trade in finished products and raw materials.

The BAT delegation appreciated the government’s enforcement drive but raised concerns over excise stability, the widening price gap between formal and illicit products, and the export competitiveness of Pakistani tobacco. 

The delegation emphasized that a predictable policy environment and stable excise regime would support formal sector growth, boost revenue, and facilitate long-term investment planning.

The minister responded that sectoral reviews are underway to assess policy measures and address anomalies where necessary, while ensuring alignment with broader fiscal objectives. 

He reiterated that revenue mobilization remains critical for fiscal stability, adding that the government remains open to constructive engagement to ensure sustainable and effective policies.

On the macroeconomic front, the minister highlighted progress over the past two years, citing improved fiscal indicators, easing inflation, strengthened foreign exchange reserves, and enhanced external stability.

He stressed that maintaining macroeconomic discipline is key to providing a predictable environment for domestic and foreign investors.

The meeting concluded with both sides agreeing to continue engagement on enforcement, taxation, and competitiveness to ensure policy coherence and sustainable development of the sector.

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