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September 7, 2016



Illegal tobacco products abound in market

Plethora of laws fail to nab criminals who manufacture, market
counterfeit cigarettes and flout every law on the subject

ISLAMABAD: Over 25 laws exist for checking illegal cigarette trade alone with 13 law enforcing agencies responsible for cracking down on tax evaders, smugglers, counterfeit brand manufacturers who inflict loss of billions on the national exchequer per annum, but the authorities concerned have failed to stop illegal manufacturing of cigarettes and its supply to consumers all over the country.

Since promulgation of non smoking ordinance in 2002, the government has made many laws on the subject. However none of those laws has brought the tax-evading, illegal cigarette manufacturers and dealers into the regulatory net.

The sale of local tax-evaded cigarettes continues to be on the rise with statistics pointing at the prevalence of locally manufactured cigarettes in the market, priced at an average of Rs27 per packet – an amount that is below the minimum tax per packet amount set by the government at Rs39.69. The government, in 2014 alone suffered loss of over Rs24 billion in revenue due to the illegal sale of cigarettes in the country.

When the Non-Smokers Ordinance (NSO) came into effect, Section 3 of the NSO required cigarette manufacturers to put in place a legible health warning on packs; a regulation that the legitimate manufacturers of the country complied with in time.

Immense progress in legislation has been made since the Prohibition of Smoking and Protection of Non-Smokers Ordinance 2002 came into effect making tobacco advertisements virtually non-existent.

In 2004, a complete ban was enforced on the sponsorship by any company related to tobacco business, of any sporting or youth-related activity or event. Since then, not a single activity has ever surfaced and the legitimate, tax-paying tobacco industry has given up sponsorships for any sports related events. The year 2006 saw a complete ban on tobacco advertisements through billboards and the law was religiously followed in the same year, without any attempt to dodge or circumvent the law.

In perhaps the most far-reaching legislation in 2007, tobacco advertisements in both print and electronic media were completely banned. In addition to the print and electronic ban, tobacco advertisements on shop fascia were also put into effect; again a move that was complied with by the industry. Needless to say, had there been violations of this blanket ban on tobacco advertisements, it would have been known to the public.

Then 2009 saw a complete ban on free incentives, rebates and sampling and to date, there has been no evidence against the legitimate industry to claim otherwise. As of 2013, outdoor advertising was also banned however the legitimate industry had already voluntarily given up outdoor advertising by this point.

Since 2009, all public places were declared completely smoke free and public place smoking law came into effect. Prior to 2009, designated smoking areas existed for smokers in public places however the 2009 legislation declared a complete ban on public place smoking. 

In parallel with the increasing tobacco regulations, youth smoking prevention was a top-most government priority, one that led to a ban on pack of 10 cigarettes with the intent of reducing the youth’s ease of access to cigarettes. As of 2011, cigarettes can only be bought in packs of 20’s across the country to achieve this objective.

In addition to this ban, the tobacco industry sponsors an annual No Sale to Under-18 sticker campaign for retailers nationwide to help them comply with the law. As a part of this campaign, ‘No Sale to Under-18’ stickers with the Government prescribed size and format are displayed in a prominent place at retail outlets.

So much so that about 25 laws exist for discouraging tobacco smoking and additionally for curtailing illegal cigarette trade. Then there are over 13 law enforcement agencies that are entrusted with the crack-down on tax evaders, smugglers, and counterfeit cigarette manufacturers. And yet, according to estimates by research agency Nielsen, illegal cigarette trade is now the second largest player in the country ahead of legitimate player; Phillip Morris. 

Manufacturing of illegal cigarettes is on the rise with more than one billion cigarettes added to the segment annually. Although the government has empowered 13 agencies in Pakistan, there is a need to prioritise the importance to curtail the sale of illegal cigarettes. Capacity constraints and the lack of coordination between different law enforcement agencies have also created a lax law enforcement environment for illegal cigarettes.

The government suffers a shortfall of billions of rupees annually in tax collection while duty-evading brands sell in the market flouting every regulation openly. They continue to use on-store advertisements, give discounts and rebates to consumers, openly associate themselves with sporting events, ignore every regulation put in place to protect youth and go as far as to sell below the minimum tax applicable on them, sources told.