Estimating the Under-Reporting of Cigarette Production in Pakistan [Working Paper Series]

This Working Paper was written by Social Policy and Development Centre in Pakistan. The working paper examines the under-reporting of domestic production of cigarettes from 2018 to 2021. In that time period, the researchers estimate that the government lost PKR 29.5 billion in cigarette tax revenue due to under-reporting. The industry under-reports by 8% of the declared production, or 4 billion cigarettes per year. Pakistan currently relies on manufacturers to declare their own production, which incentivizes them to under-report to evade taxes. The industry also uses front-loading as a strategy to avoid tax increases. This under-reporting allows companies the flexibility to set lower prices in order to entice more consumers. The working paper recommends that policy makers strengthen monitoring and enforcement of tobacco taxation to raise additional tax revenue and prevent future under-reporting.

A Policy Brief based on the report can be found here.