Non-duty paid cigarettes: MNC ties $100 million investment to eradication of illicit trade

A leading multinational cigarette manufacturing company has urged Finance Minister Ishaq Dar to take immediate steps and root out illicit trade of non-duty paid cigarettes or else the company would be constrained to reassess its decision of investing $100 million in Pakistan.
In a communication to the Finance Minister here Thursday, Philip Morris Pakistan Limited (PMI) said the legal duty paying tobacco industry has been facing the issue of non-duty paid cigarettes' illicit trade for long time. During past three months after the huge excise duty increase announced in the FY16 national budget, illicit cigarettes' trade acquired unprecedented levels of growth.
During the last four years, illicit cigarette trade has risen by approximately 43.5 percent in volume meaning thereby that one cigarette out of four cigarettes consumed in Pakistan being non duty paid, of which 89 percent are produced by locally in KP and AJK regions. These brands sell way below the minimum price stipulated under the tax laws and in blatant violation of various other regulations set by the Ministry of Health. Renowned economic institutes have estimated the government's tax revenue loss in the range of Rs 24 to Rs 26 billion in a year.
It said the legal duty paying tobacco industry plays a crucial role in economic growth of Pakistan by generating income and employment, with over a million people directly or indirectly dependent on the tobacco industry. Based on the above numbers the legal duty paying tobacco industry is likely to suffer huge damage in the absence of immediate and decisive enforcement action by the government against duty evading non-compliant local tobacco manufacturers.
PMPKL is an affiliate of a large US investor in Pakistan which has invested over $700 million and continues to invest significantly on an annual basis in people, processes and operational capabilities. As government is aware, the US investor is considering to bringing additional foreign direct investment (FDI) to the tune of $100 million, which is currently meeting the local regulatory requirements. The current environment of rising illicit trade is a discouragement to further investment in the Pakistan. It is our hope that the government of Pakistan recognises our significant contribution and takes immediate steps to stamp out illicit trade of cigarettes before Philip Morris Pakistan Limited is constrained to reassess the decision to further invest $100 million.
The company has urged the Finance Minister to look into this challenge as a priority due to its social, economic and political impact. The company is ready to further cooperate with administration in addressing this issue of common concern and ensure the enforcement of existing fiscal and other related law, PMI added.