‘Pakistan loses Rs24bln in taxes on illegal cigarettes’

KARACHI: The government is facing huge challenges in the collection of taxes from the tobacco industry, as the national exchequer is being deprived of Rs24 billion on an annual basis due to illicit trade of cigarettes, according to a research report issued on Wednesday.

The research was conducted by Neilson Pakistan, a branch of Neilson International, a research organisation based in more than 100 countries in the world and engaged in several consumer-related researches in Pakistan.

Neilson’s representative Jawad Riaz presented the research report at a local hotel during a media briefing organised by the CRS Public Relations.

Riaz said Pakistan’s 23 percent population is consuming cigarettes at an average of 17 cigarettes per person per day and a total of 85 billion cigarettes are being used annually.

However, he said, 23.7 percent of the total cigarettes were being sold through illicit trade, including under-invoicing, smuggled or counterfeit.

Of these, the majority were based on under-invoiced brands, which are being sold at a price lower than the minimum tax on a cigarette packet.

The minimum tax is Rs36 per packet, while most popular illicit brand cigarette packet is available at Rs27, he said.

Only two companies, Pakistan Tobacco and Philip Morris are the taxpayers that had paid more than Rs100 billion in taxes last year, while only one percent taxes are collected from the 23.7 percent illicit brands.

The report also said that in order to curb smoking, Pakistan has regulated 25 laws, but none of them have so far been implemented.

Riaz recommended that in order to discourage smoking, the government should put more taxes and curb the illicit cigarette industry, as smokers moved to cheap brands when taxes were enhanced.