Illicit cigarette trade in Pakistan is often linked to Azad Jammu & Kashmir (AJK), a self‑governing non‑tariff area. While AJK accounts for only 1% of total cigarette production, weak tax administration and regulatory gaps have enabled under‑reporting and evasion. Fiscal laws on excise duty and sales tax are the same in AJK and Pakistan, but enforcement remains limited. The policy brief proposes that rather than blaming AJK, strengthening tax administration through electronic track‑and‑trace systems and coordinated enforcement of laws such as the Vend Act, 1958, is essential to curb illicit trade and safeguard revenues.
