Pakistan Eyes Rs40bn Tax Gain From Cigarette Crackdown

Prime Minister Shehbaz Sharif has been informed that a tougher enforcement drive against Pakistan’s cigarette sector could bring in an additional Rs40 billion in tax revenue during the current year. The briefing took place in Islamabad during a high-level review of Federal Board of Revenue reforms and efforts to curb tax leakage.

Officials told the prime minister that illicit cigarette trade, smuggling and under-reporting remain major sources of revenue loss for the state. The proposed crackdown is being framed not only as a sector-specific enforcement action but also as part of a wider plan to rebuild confidence in the country’s tax machinery.

The meeting reviewed a broader restructuring of Inland Revenue operations, an area that has often faced criticism over weak enforcement, excessive human discretion and limited transparency. The government’s plan seeks to move toward automated systems that reduce direct contact between taxpayers and officials.

Shehbaz Sharif directed authorities to move ahead with a modern tax management model built around technology, automation and stronger monitoring. He said revenue collection must become more transparent and effective so that reforms help widen the tax base rather than only increase pressure on compliant taxpayers.

A key part of the proposal involves using property, vehicle and banking data to identify possible gaps between declared income and visible assets. Officials also briefed the meeting on the use of artificial intelligence to support assessment, verification and enforcement, especially in areas where manual systems have allowed leakages to persist.

The government is also considering the creation of specialised wings to reorganise tax operations. These include a National Faceless Audit Wing, a National Assessment Wing and a Field Operations Wing, which are expected to separate assessment, audit and enforcement functions more clearly.

The prime minister appreciated provincial authorities for supporting action against illegal cigarettes, a factor officials linked to the projected revenue improvement. The meeting also decided that the proposed automated income tax collection model would first be launched in Islamabad as a pilot before wider implementation.

Pakistan’s narrow tax base has long remained one of the biggest weaknesses in its public finances. Successive governments have struggled to document income, reduce evasion and collect revenue from sectors that operate outside formal reporting channels, while the burden often falls heavily on salaried people and registered businesses.

The latest cigarette-sector crackdown could therefore become an early test of whether the government can combine enforcement with structural reform. If the Rs40 billion target is achieved and the Islamabad pilot delivers results, the FBR may face stronger pressure to expand similar technology-driven systems across the country.