Illicit cigarette trade causing Rs 40 billion loss annually

Around 87 million illicit cigarettes are consumed every day in Pakistan, which are sold way below the printed pack price, which tantamount to discounting and gross violation of Ministry of Health (MoH) laws apart from causing loss of Rs 35-40 billion to the national exchequer annually. "This discounting allows easy access to youth and hence facilitate youth initiation thus becoming one of the biggest challenges for the MoH, however, no efforts are seen at the Ministry's end to curtail this issue," market sources told Business Recorder.
Currently in Pakistan, tax increases are counterproductive in achieving the government's revenue and health objectives since they are encouraging people to smoke cheaper cigarettes that are more affordable, the sources said, adding: "This results in attracting the youth to initiate smoking due to cheap prices as one cigarette is available for one rupee."
The sources claimed that the cigarette industry of Pakistan comprises two multinational companies and around 20 registered local cigarettes manufactures. The two multinational companies contributed Rs 89 billion in excise duties and taxes during fiscal year 2017-18 constituting 98-percent of the cigarette excise revenue.
As per Oxford Economics Study, Pakistan ranks number one in illicit trade of cigarettes in Asia, with a total volume of 32.6 billion illicit cigarettes consumed in 2017. The primary reason for the existence of illicit manufactures is the tax driven price differential between legal and illicit brands, which currently stands at 130 percent.
The sources revealed that the local cigarette manufactures continue to sell their brands with prices below the minimum tax payable on a pack while blatantly violating health regulations. The Prime Minister of Pakistan and Finance Minister of Pakistan have both acknowledged the presence of illicit cigarettes in Pakistan, the sources added.
Furthermore, the sources said the illicit cigarettes violate other health laws, such as advertising, targeting youth, giving gifts, incentives and lucky draws, all of which are prohibited under MoH laws. Violation of these laws is a criminal offence however no action is ever taken in this regard. A number of NGOs are very active on tobacco control although it is amazing how they have never raised any issues on the violation by these small manufactures, which is the biggest threat to tobacco control, the sources added.