Sunday July 14, 2024

84pc of cigarette brands don’t have track & trace system: survey

Study also revealed that the share of illicit untaxed) cigarettes has gone up to 54 percent

By Mehtab Haider
May 10, 2024
This representational image shows smoke emanating from a cigarette. — Unsplash/File
This representational image shows smoke emanating from a cigarette. — Unsplash/File

ISLAMABAD: Terming the Track and Trace System (TTS) a complete failure, the IPSOS research study has found that 84 percent of brands of cigarettes selling in the market did not have a track and trace system.

The study also revealed that the share of illicit untaxed) cigarettes has gone up to 54 percent with 41 percent of locally manufactured tax-evaded brands and 13 percent smuggled brands. The share of the formal sector which are duty-bound cigarettes has further shrunk and now stands at 46 percent. It indicates that the share of illicit cigarettes has been rising at a phenomenal pace. With the existing situation, the formal sector is going to lose the market without bringing a paradigm shift in policymaking.

This was the crux of the research study launched by IPSOS titled, ‘Pakistan Cigarette Market Assessment 2024’ on Thursday. The report represented a survey of over 1,000 retail outlets across all the four provinces, thoroughly covering both urban and rural areas.

Easy availability of low-priced smuggled and non-tax paid cigarettes all across Pakistan, non-compliance of Track & Trace system, cigarette sales below the minimum legal price (MLP), price disparities and numerous other crises had not only put down the compliant cigarette industry to its knees but was also denting the national exchequer with an annual loss of Rs300 billion.

While visiting retail outlets in these areas, IPSOS checked the availability and prices of non-tax paid and smuggled cigarette brands and estimated the market shares, compliance of Track & Trace (T&T) and minimum legal price (MLP), price disparities and new phenomena in the market. Later, IPSOS also presented an analysis of the information collected from the markets of these areas. Furthermore, in wake of increased enforcement, an observation study was also conducted across the sample to corroborate the findings. “Year on year, 6 brands have been included in the Track and Trace list, however, there have been numerous instances where the same brands were being sold without stamps. However, the failure to implement Track and Trace is evident as 37 news brands, bringing the total to 165 brands, in the market do not have track and trace stamps.”

While exposing another failure of the authorities concerned, the research mentioned that in Pakistan around 104 cigarette brands were being sold below the MLP while 45 smuggled brands were being sold above the MLP. “53 percent of the cigarette brands available in the market are being sold below the MLP”, the study added.

In a bid to show a huge margin of disparities in the market, the research highlighted that a locally manufactured tax evaded pack of a famous brand was being sold in the market for Rs120, while another pack of a famous smuggled brand was priced at Rs165. Both the brands were easily available across the surveyed areas. Contrary to that, the most popular tax-paid brands were being sold in the market for Rs220 and 550. Nearly 95 percent of the cigarette market lies between Rs65 and Rs220 price bracket per pack.

The research said that in the surveyed areas most of the locally manufactured tax evaded brands were also available in packs of 25 and 30 cigarettes. This availability was not only encouraging the retailers towards single-stick sales but also was providing additional financial benefits to them in the form of discounting.

While analysing the overall situation, the study said that the consumers were constantly shifting from duty-paid to locally manufactured tax evaded and smuggled cigarette brands, which is why the overall illicit share, which was recorded 48 percent in last year’s IPSOS syndicated research, this year is expected to reach 56 percent by June 2024.

The study said, “Cigarette companies in Pakistan are selling 79-81bn sticks annually. This means that approximately 2.5bn cigarette packs are evading tax net. This tax evasion is causing the national exchequer to lose Rs300 billion annually.”