Share of smuggled cigarettes further increases: Documented sector demands govt take action

ISLAMABAD: The documented tobacco sector has sought immediate support of the government to take action against smuggled and illicit cigarettes, whose share in local market has crossed 50 percent mark.

Briefing reporters on “Current Tobacco Dynamics” on Sunday, officials of the Pakistan Tobacco Company (PTC) apprehended that the market share of the illicit tobacco sector would further cross 53 percent in the next quarter of 2023-24.

The real impact of the 200 percent raise in the FED on cigarettes would be seen during current fiscal year.

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The spokesperson of the PTC Sami Zaman expressed serious concern that the legitimate cigarettes industry witnessed a production decline of 44 percent in June this year and the overall sales drop was 28.4 percent in 2022-23.

Sami Zaman noted with concern that the implementation of the track-and-trace on only two international manufacturers has resulted in lack of enforcement for the remaining un-documented tobacco sector. There should be a uniform implementation of the track and trace on all local manufacturers. The local tax evading units are engaged in the purchase of un-documented tobacco from farmers.

“The tax stamp enforcement is still a distant dream. A latest development on the issue is that the manufacturers in Azad Jammu and Kashmir (AJK) have challenged Track-and-Trace in courts and obtained stay order. The deadline for implementation has been subjected to multiple delays since original implementation date since 2022. Six manufacturers in Pakistan are still in courts”, he stated.

He stated that the government has failed to stop the sale of cheap smuggled cigarettes even without health warnings, but monitoring is only limited to the multinationals where track-and-trace has already been fully enforced.

Besides enforcement of the government, taxpayers should be educated that they should only purchase tax paid cigarettes.

Zaman stated that the smuggled cigarettes do not pay taxes; this is why they are cheaper, do not have the mandatory graphic health warning as per the laws of Pakistan and offer attractive flavours that are even sold in lose packs.

The government imposed a high rate of the FED up to 200 percent in February making production too costly, but the market has been largely taken over by unchecked smuggling of cigarettes that are cheap as there are no taxes and duties over them.

The industry had announced to purchase 85 million kgs of raw tobacco but it could secure only 72m kgs and the supply shortage had led to a price rise in the current season.

They informed that the illicit market volumes will severely impact the legitimate industry’s volumes in the next quarter. At the same time, the government revenues are also expected to be shrinking from the next year.

Against the target of Rs 180 billion for 2022-23, the tobacco sector has contributed Rs 175 billion during the period under review. The collection of the FED from tobacco sector has increased in 2022-23, but the volumes are sharply going down, Sami Zaman added.

Copyright Business Recorder, 2023