IMF expresses 'concern' over cigarette tax evasion

ISLAMABAD: The International Monetary Fund (IMF) has raised concerns over tax evasion in Pakistan’s cigarette sector, citing that illicit and untaxed cigarettes now account for up to 50% of the industry, ARY News reported on Friday, citing sources.

According to details, the concern was shown by the IMF delegation during talks with Pakistan authorities for unlocking of $1 bln loan amount under the current programme.

Sources said that the IMF has urged Pakistan to regulate the illegal tobacco market, with discussions also covering a market study on illicit cigarette trade during a detailed session with the Federal Board of Revenue (FBR) regarding the Track and Trace system.

IMF lauded FBR’s Track and Trace mechanism, noting that it has significantly reduced tax evasion across four key sectors—sugar, cement, fertilizer, and tobacco.

The system has enhanced transparency in tax collection within the production sector and curtailed the volume of counterfeit production, the sources said

The sources further said discussions were also held on expanding the Track and Trace system to six additional industries.

Meanwhile, IMF expressed dissatisfaction over the retail sector’s tax compliance, stressing the need for improved revenue collection.

To address tax shortfalls, proposals were discussed for the upcoming budget, including a new fixed tax scheme aimed at bringing retailers into the tax net.