Rise in illicit cigarette sales feared After Increase In taxes

BUSINESS:Pakistan Tobacco Company (PTC) has stated that new taxes on cigarettes will increase smuggling and supply of counterfeit goods to markets, expressing grave concern regarding the recent mini-budget announcement.

In an interview with the media on Friday, PTC Director of Legal and External Affairs Syed Asad Shah stated that the cigarette industry would receive less revenue as a result of the unprecedented increase in federal excise duty (FED) and the lower minimum price set by the Federal Board of Revenue (FBR).

He showed a number of illegal cigarette packs that were available in markets all over the country. These packs contained smuggled brands without health warnings, counterfeit products of local brands, and locally produced cigarettes that were not registered and did not pay taxes.

Shah was of the opinion that those involved in the illegal cigarette trade were ready to make a big splash in the markets with their goods.

He predicted that “currently, the share of illicit cigarettes in Pakistan is 35%, but this will increase to 40-50% in the current year.” Additionally, he stated that the government’s revenues would also decline after two years if it did not rationalize its policy of managing the threshold price level and did not restrict illicit trade.

Because these products do not receive the applicable tax per pack, illicit cigarettes are sold at prices below the minimum.

In fiscal year 2021-22, the cigarette industry paid a total of Rs150 billion in taxes, and the new taxation measures are expected to bring in around Rs185 billion this year.

The industry estimates that two multinational corporations, PTC and Philip Moris, will contribute approximately Rs182 billion to taxes.

Shah noted that local players paid only Rs3 billion in taxes and duties for the 35 cigarette companies that operated in Pakistan and produced approximately 200 brands.

“How some businesses are selling cigarettes in packs for Rs7 is the question; The truth is that many people are not paying their taxes on time,” he added.

As a result of the recent increase in FED, taxes and duties on tier-2 cigarette packs came in at Rs101, but the minimum sale price of the same packs was Rs108, PTC officials emphasized the need for a rational increase in the minimum legal price of cigarettes.

Officials from the company demanded that the finance ministry take tough measures against the illegal cigarette trade and make sure that the FBR’s track and trace system, which monitors the supply and production of cigarettes, is used everywhere.