The continued increase in Federal Excise Duty (FED) on tobacco sector has not resulted in proportionate growth in revenue for the national exchequer, as volumes have shifted from the taxpaying industry to tax evaded cigarettes. This transpired at an interactive workshop organised by CRS Strategic Communications here at a local hotel on Wednesday.
The relevant statistics shared on this occasion suggested that in the ongoing fiscal year 2015-16, FED has been increased to 31 percent while revenues increase is recorded at only nine percent. This could be compared to 23 percent FED in fiscal year 2014-15 when the revenues grew by 17 percent. In the previous financial years 2013-14 and 2012-13, the FED increases were 15 percent and revenues growth were recorded at 16 percent in FED revenue from the tobacco sector.
In addition, the speakers at the workshop argued that formulation of effective policies and practical steps at governmental level coupled with social awareness and co-ordination among stakeholders are essential to curb mushroomed illicit cigarette trade in Pakistan. Jawwad Riaz, Senior Manager Nielsen Pakistan, while sharing a study conducted by Nielsen Pakistan, said that the price differential between legal and tax-evaded cigarettes was the major challenge the government was facing in curbing the menace of non-availability of level playing field for the legal tobacco industry.
"One in every four cigarettes in the country is illicit. Alone in Pakistan, nearly 19.5 billion illicit cigarettes were consumed in the year 2014, out of which 17.3 billion or 89 percent were local non-duty paid. More than two billion cigarettes are smuggled into Pakistan as well and added into the illicit trade each year," he said.
"Overall, 23.7 percent of the total cigarettes annually sold in Pakistan are illicit. In addition to billions in revenue loss to the government, local non-duty paid cigarettes undermine the country's public health objectives by giving easy access to youth and encouraging youth smoking by selling cigarette packs below the minimum tax payable on a cigarette pack. Shortly put, the pervasive illicit cigarette trade continues to grow leaps and bounds," the report said.
In his comments, Aniq Zafar, CEO CRS, said: "In the backdrop of the aforementioned eye-opening scenario, it becomes essentially vital for all the stakeholders in Pakistan to not only develop an understanding of the existing conditions involving illicit trade in cigarettes but also take a consolidated and unanimous approach to play an effective role against this ever growing menace."