Editor’s Note: See also: Pakastani Inter-Services Intelligence Involved in Illicit Cigarette Trade in Kashmir? and Pakistan Adopts Anti-Cigarette Smuggling Strategy: Lowering Tobacco Taxes.
From: American Enterprise Institute
With the stated aim of increasing revenue and discouraging smoking, Pakistan raised tobacco duties over the past five years. The result empowered illicit actors, with a flourishing of illicit production and smuggling of cigarettes. Revenue rose initially, only to fall back as untaxed products proliferated. While organized crime and local production interests were the big winners, smoking rates have remained largely unchanged. Pakistan’s authorities have tried to resolve the problem through better enforcement and lowering of duties for certain products, but overall the lesson learned is that rapid duty increases have significant negative effects that are difficult to reverse when illegal supply cannot be controlled.
Large Cigarette Tax Hikes, Illicit Producers, and Organized Crime: Lessons from Pakistan
