Despite TTS system, counterfeit cigarettes still being sold

ISLAMABAD: Despite installation of much-hyped track & trace system, counterfeit cigarette sticks are currently being sold in the country and causing estimated losses of Rs5.7 billion in duty and taxes to the national exchequer.

It also indicated that affixed fake stamps of the track & trace on cigarette packs also exist in the market, resulting in escalating losses of revenues for the national kitty. The government had hiked Federal Excise Duty (FED) by 200 per cent in the last financial year after which the illicit cigarettes industry had become a lucrative business for tax evaders. Now it has come to the surface that counterfeit cigarette sticks are currently being sold in market with fake stamps placed on them.

The representatives of Pakistan Tobacco Company (PTC) said in a statement on Wednesday that the cigarette industry was experiencing a surge in illegal trade in recent months, particularly following a significant excise duty increase in February 2023, when it was hiked by 154 per cent through a mini-budget in the last financial year in one go.

Fuelled by the excise hike, the tobacco industry witnessed a concerning trend of widespread availability of counterfeit cigarettes in the market, affixed with fake stamps. This raised serious doubts about the efficacy of the track & trace system, both in terms of implementation and enforcement.

Around 850 million counterfeit cigarette sticks are currently being sold in the country, equivalent to 42.5 million packs featuring fake stamps, resulting in a substantial loss of approximately Rs5.7 billion in duties and taxes to the national exchequer.

The issue is more prevalent in big cities such as Islamabad and Rawalpindi as well as other regions. It is surprising to note such blatant violations in cities where enforcement is considered easier to conduct by the relevant authorities in contrast to far-flung areas.

The implementation of a track & trace system can only be successful through extensive and sustained enforcement at the retail level. The representative stated that only two cigarette manufacturers have fully implemented the track & trace system, yet the prevalence of illicit trade persists and continues to grow. All cigarette manufacturers must be brought into the tax net to ensure the success of this system, the representative added.