Illicit trade of cigarettes: need for drastic revision in taxation regime stressed

Cigarette smuggling is taking place due to porous borders with other countries, and there is need for revision in taxation regime at import stage with strict enforcement at border areas to check illicit trade. Addressing a workshop "Identification on Counterfeit Recognition" at a local hotel, Director General Human Resource Management of Federal Board of Revenue (FBR) Rana Seerat said that expertise in the identification of illicit/counterfeit cigarettes is the first step towards addressing the evil of illegal cigarette trade.
She said that the extent of tax evasion and illicit trade was adversely affecting the economy and also putting unjustifiable burden on the honest taxpayers. However, she sounded optimistic that the problem can be dealt with collectively which will help improve tax-to-GDP ratio. She said the local industry has requested the FBR authorities to follow the best international practices to check smuggling and counterfeiting of cigarettes.
The local cigarette industry is one of the revenue spinners as far as FED is concerned. The FBR receives 39 percent of its FED and 3.5 percent of total tax revenue from local cigarette industry. Addressing the workshop, Ansar Javed Director General of Training & Research Inland Revenue said illegal cigarette industry is one of the largest tax evaders. He said that Pakistan ranks among the top 10 countries in the world when it comes to illegal cigarette trade.
He added that about 18.5 percent of the cigarette industry in Pakistan comprises either smuggled products or products on which the due levies are not paid. He regretted that country's tax-to-GDP ratio is very low and could not afford revenue loss from one sector. He also acknowledged the inherent weaknesses of his organisation and conceded the FBR is still far from completely resolving this problem. The presentations were also made by officials of PMPKl (formerly Lakson Tobacco).