Islamabad, May 2 (HS): Pakistan is incurring an annual revenue loss of approximately 3.4 trillion rupees due to illegal trade. Senior officials of the customs department, who claim to maintain integrity, are involved in this trade. A recent report from the Policy Research Institute of Market Economy (PRIME) has raised alarm, revealing this to the government. The report was released today and is titled Combating Illegal Trade in Pakistan. It states that the estimated loss is equivalent to 26 percent of the annual tax target for the current financial year.
According to Reports,PRIME estimates that illegal trade results in an annual revenue loss of 3.4 trillion rupees. This includes approximately 30 percent loss due to the misuse of the Afghan transit trade facility. The seriousness of illegal trade is reflected in the estimated annual tax revenue loss of 3.4 trillion rupees caused by an informal economy estimated at 123 billion dollars. Illegal trade poses a serious challenge to Pakistan’s economy, harming other formal businesses and putting consumer safety at risk.
The report indicates that illegal trade has taken root in key sectors, ranging from smuggled petroleum and counterfeit medicines to untaxed cigarettes and low-cost consumer goods. These findings have been released at a time when the federal government is focusing on the role of tax officials in generating low bills for smuggling and tax evasion.
Pakistan’s intelligence and investigative agencies have recently pointed to the role of customs officials in smuggling and creating low bills. There is also evidence of manipulation in goods declaration forms to facilitate tax evasion. PRIME estimates that revenue loss due to tobacco smuggling exceeds 300 billion rupees. In February 2023, the government raised federal excise duty on tobacco products by up to 150 percent to generate additional revenue for budgetary support. PRIME noted that since then, the market share of illegal cigarettes has increased from 30 percent to 56 percent, resulting in an annual loss of more than 300 billion rupees. The estimated revenue loss from Afghan transit trade is one trillion rupees. After imposing strict conditions to curb smuggling under transit trade, Pakistan relaxed the conditions last month by allowing the import of goods bound for Afghanistan in exchange for an insurance guarantee.
Prime has stated that oil smuggling is causing a loss of ₹270 billion. The report estimates that the amount of smuggled Iranian oil is 2.8 billion liters. The government levies a customs duty of ₹16 per liter and a petroleum development fee of ₹78 per liter. This is why smugglers are turning to smuggled oil for higher profits. Due to the outdated framework of border controls and limited automation in the customs process, it has become difficult for the government to stop the smuggling of goods. The report mentions that there is a lack of risk-based profiling systems and modern container scanning technology in Pakistan. This is being exploited by smugglers and officials.
Additionally, a study conducted by the Institute of Public Opinion and Research in 2024 found that out of 264 cigarette brands, only 19 comply with track and trace system regulations, while 56 percent of the market consists of non-compliant and tax-free products. The report estimates the revenue loss due to counterfeit drugs at ₹65 billion, stating that nearly 40 percent of medications are fake or of poor quality.
Prime has noted that over 60 percent of tires are brought in through smuggling, resulting in a revenue loss of ₹106 billion. About 30 percent of the tea market is linked to smuggling, leading to a loss of ₹10 billion. The minimum retail price for tea is ₹1,200 per kilogram, and an 18 percent sales tax is applied to it. According to the report, Pakistan ranks 101st out of 158 countries in the 2025 Illegal Trade Index. It performs below the global and regional average due to systemic weaknesses in governance, enforcement, and economic policy-making.
Hindusthan Samachar / Jun Sarkar
