Illicit trade: the silent economic killer

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LAHORE: Smuggling has expanded the shadow economy in Pakistan, which will cost billions of lost tariffs, weakening public confidence in domestic industries and implementing public confidence.

From urban markets to remote border areas, illegal trade is flourishing. According to data cited by economists and other commercial companies, the annual price of smuggled goods is estimated from $ 6 billion to $ 8 billion. Some independent estimates suggest that the actual data can be close to $ 12 billion, once under -invoicing and informal imports are taken into account. The loss of tax, including customs duties, sales tax and income tax, is estimated at about 3.4 trillion rupees annually, which is about one -fourth of Pakistan’s federal budget.

High demand, high margin equipment makes the most part of illegal trade: cigarettes, tires, textiles, tiles, sanitary wares, electronics, petroleum products, cosmetics, black tea and vehicles. It is believed that the loss of cigarettes illegally traded is Rs 80-100 billion in annual tax losses. The market share of non-taxing cigarette brands-which is often sold without health warning-allegedly exceeded 50 %, affecting both public health efforts and legitimate industry players.

Many of these goods enter the country through unsafe borders and transit routes. For example, an important volume of products made for Afghanistan allegedly finds their way to Pakistani markets. Similarly, Iranian fuel and steel products have been observed to enter through Balochistan, which are often sold at prices, which cannot be matched by local producers. A recent seizure near Panjgur allegedly included 25,000 tonnes of non -documentary steel.

Another area of concern includes misuse of passenger equipment allowance, especially on the Middle East routes. High value items such as smartphones, television and perfumes are allegedly brought under personal allowance but commercial quantities. According to internal customs estimates, the channel is only Rs 70-100 billion in annual tax loss.

Systemic risks have also been identified at key entry points. Recent internal audits and implementation measures have revealed irregularities in the import declaration, including under -invoicing, wrong classification, and suspected misuse of digital customs system. In one case, thousands of announcements in the Pakistan single window were flagged to make high tariff equipment as a potentially false statement.

Despite occasional crackdowns and personnel changes, long -term structural reforms have yet to be implemented. Experts advocate for a comprehensive strategy that includes digitized customs system, staffing circulation, strict border management – especially at ATT exit points – and review of import taxes to reduce the invention of illegal trade. The maximum inspection of domestic retail markets is also recommended where smuggled goods are openly sold.

Rising consumer awareness is equally important. Most demand for smuggled products comes from ordinary buyers who cannot realize wider implications: reduction in tax collection, risks to public safety, and jobs in formal fields.

In a country facing a high fiscal deficit, heavy dependence on the shrinking economy and external financing, non -checking smuggling is a serious challenge – not only for economic recovery, but also for the authority and credibility of the state. Without a meaningful institutional reforms and political will, the risks of smuggling are trapped as a legal system that works beyond legal status.