“Illicit cigarettes are inflicting a huge loss on the national economy” – Pakistan

LAHORE: Illicit cigarettes in Pakistan not only inflict huge losses on the national kitty, but also pose serious health risks to the consumers of these cigarettes.

Illicit cigarette in Pakistan is available at a price range of 20 to 35 rupees, which is lower than the government mandated minimum price of 62.76 rupees, sources said adding: “In the tobacco sector, the share market share of illicit cigarette sales has reached 40%, costing the government more than 80 billion rupees a year in taxes alone.

The two tobacco companies in Pakistan, with a market share of around 60%, contribute 98% of tobacco tax collection. The other 50 tobacco companies only contribute 2% to the national treasury, the sources say.

Experts believe that consumers of legal cigarettes will eventually be unable to absorb the multiple taxes and price increases and will shift their consumption to cheap illicit cigarettes; any increase in taxes imposed on legal cigarette manufacturers will result in an increase in illicit activities.

The sources argued that Pakistan has only 10 Green Leaf Threshing (GLT) factories for the produced tobacco and if all taxes are applied at the GLT stage, the entire tobacco industry will fall under the tax net .

Experts say strict law enforcement is needed to curb the illicit tobacco trade in Pakistan. In this regard, the effective application of the track and trace system is essential to combat tax evasion, they added.

The track and trace system involves the implementation of a robust national electronic monitoring system of production volumes by affixing tax stamps to various products to track their flow through the supply chain.

Copyright Business Recorder, 2022

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