ISLAMABAD: The Federal Board of Revenue (FBR) will suffer a massive revenue loss of Rs 310 billion in 2023-24 on account of illicit cigarettes out of total industry’s tax potential of Rs 551 billion during current fiscal year.

Asad Shah, Director Legal & External Affairs, Pakistan Tobacco Company (PTC) informed media on Tuesday that the track-and-trace system is a total failure with additional cost to the documented businesses. The share of illicit industry has considerably increased after implementation of the track and trace system.

Mona Iskandarani, Area Head of Legal & External Affairs, Asia Pacific, Middle East and Africa (WEST) at BAT Group was also present.

Asad Shah said that the estimated volume of legitimate industry is 29.6 billion sticks of cigarettes with revenue projection of Rs 241 billion of documented industry. Out of total tax potential of Rs 551 billion for 2023-24, the FBR will only collect Rs 241 billion due to Rs 310 billion revenue loss caused by the illicit industry. “We have written a letter to the FBR that out of 17 cigarette making machines, nine are operational and three would be exported,” he said.

Participants were also informed that since the implementation of T&T in Pakistan, i.e., July 1, 2022, illicit sector will grow from approximately 37% in fiscal year 2021-22 to approximately 63% by the end of fiscal 2023-24. This increase in illicit cigarettes will potentially cause a revenue loss of approximately Rs 310 billion to the government in fiscal year (2023-24).

He pointed out that T&T system has been implemented in various countries in one form or the other, but the system does not offer a silver bullet solution to fight illicit trade, and only serves as a tool to facilitate law enforcement agencies to carry out raids and seizures of tax evaded products.

Shah said that despite a lapse of 15 months since the implementation deadline, only 2 multinationals out of over 40 cigarette manufacturers have implemented Track & Trace in true letter and spirit. One local company, i.e., Khyber Tobacco Company (KTC) has partially implemented it. The KTC has implemented the track and trace only at its Mardan unit.

Copyright Business Recorder, 2023