Non-duty paid cigarettes

Apropos a news item 'Non-duty paid cigarettes: most of manufacturers operating in KPK' carried by Business Recorder on 26th May, seems to be a "gross distortion" of facts. It looks as if a powerful lobby of foreign origins in the tobacco multinationals seems to be the source of this story with overt objectives of harming the indigenous but nascent tobacco industry of Pakistan.
First of all, it is relevant to bring out a statistical profile of the indigenous tobacco grower/industry of Khyber Pakhtunkhwa. According to the statistics published by Pakistan Tobacco Board (PTB), area under tobacco growth is only .27% of the total irrigated area of Pakistan. While it is a source of income for about 1.2 million people, about only 75,000 farmers are involved in tobacco growth. According to the PTB report there are 50,000 labour force employed in 21 different factories. While being identified in the lower slab of FBR taxation regime, the tobacco tax returns were PKR 77 billion in the fiscal year of 2013-2014. However, if there are instances of tax evasion it's a reflection on the law enforcement agencies and not on the petty farmer or the small manufacturers of these products.
As a result of the foreign multinationals in the tobacco world the farmers are getting a very poor deal for their product. According to the statistics of the PTB, the world prices for FCV tobacco are indicated below: The above reveals that the best vintage tobacco grown in Pakistan sadly gets the lowest price in the world. Is there anyone to rationalize this pricing structure as per world price, or will this un-fair solicitation, led by the MNCs, of the farmers of Pakistan continue to misappropriate their well deserved hard earning.
There are also several discrepancies in the said report of your reporter. While on the one hand, the "learned" reporter is lamenting on the 'low prices of the local cigarettes in the market" yet he himself quotes KPMG report revealing that "cigarettes have become 30% more expensive in Pakistan, relative to incomes growth, for consumer in 2014 as compared to 2008".
It is also interesting to point out the situation of revenue loss to the government, which are said to be of PKR 20 billion per annum, are based on the personal knowledge of the reporter, and not supported by any scientific data or reliable sources.
At this juncture it is important to point out that the large scale smuggling of imported cigarettes has now become common place. The duties and taxes imposed by the government on imported cigarettes are being evaded through manipulation of records, and these high quantities of smuggled cigarettes are brought into Pakistan to be sold with even higher profits margins for the multinationals. The smugglers from Afghanistan and Iran are not alone in this deed but they in fact backed by foreign owned manipulators present in tobacco industry. As reported in UK Times in November 2014, recently one of these groups has been fined for not complying with Europe anti-smuggling law.
Pakistani government authorities need to be more prudent with the matter of these in order to curb this illicit trade and impose heavy duties and fines on the MNC whose products are sold in the Pakistani markets through the umbrella of local representatives/smugglers. In conclusion, one can safely say that the big players of cigarettes industry, who hold over 95% share of the cigarette industry, need to pay more taxes rather then the nascent tobacco industry of Pakistan, who are already taxed to the hilt.

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Sl No  Country    Price for     Source of

                 FCV (US $)   information

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1      India         2.05            ITGA

2      S. Africa     3.92            -do-

3      Brazil        3.60            -do-

4      Malawi        3.20            -do-

5      Zimbabwe      3.70            -do-

6      Pakistan      1.66             PTB

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