IREN stubs out leading illegal cigarette trade networks

LAHORE: Inland Revenue Enforcement Network (IREN) has stubbed out the menace of non-duty-paid cigarette trade to a significant extent by relentlessly smoking out the mafias during the last year, saving billions in revenue, an official said on Tuesday.

“Since the establishment of IREN, which was constituted with the prime objective of curbing tax evasion in the tobacco industry, a substantial decline has been observed in the illegal trade of cigarettes,” an official at IREN said.

The latest IREN data, released by Federal Board of Revenue (FBR), showed the share of non-duty-paid cigarette trade was all-time high of 41.7 percent by in start of 2017, causing an estimated revenue loss of Rs40 billion annually to the national exchequer.

During the last 5 years, national exchequer had suffered revenue loss of more than Rs 130 billion due to illegal cigarette trade in Pakistan.

The data also revealed that more than 1.6 billion sticks worth billions of rupees were seized in the year 2017.

Around 10.5 million sticks were seized by Intelligence and Investigation Inland Revenue Karachi, 8 million by RTO – III Karachi, 15.5 million by Hyderabad, 9.8 million by Faisalabad, 10.2 million by Lahore, 23.19 million by Sialkot and 88 million cigarettes were impounded by the RTO Rawalpindi.

The official said following the strict enforcement by the IREN, majority of the factories started moving their operations to Azad Jammu & Kashmir (AJ&K) as closer proximity facilitated easy infiltration of non-tax-paid cigarettes into Central and Southern Punjab, with Southern Punjab being the highest consumption area for these cigarettes.

“Over the years, the prices of tax paid cigarettes increased by almost 150 percent, which increased the price differential between tax paid and non-tax-paid brands, leading to growth in sales of illegal sticks,” the official added.

He further said it had been reflected by the fact that during the last 5 to 6 years, the cigarette market has been stable in the country at 80 billion sticks; however, volumes were shifting to the illicit sector.

According to tax regime on tobacco, the minimum tax per pack has been Rs44, while the non-tax-paid cigarettes have been selling at as low as Rs15 per pack. This drove their sales higher, taking away from the taxpaying volumes.

As a result, there was no net change in the overall consumption; however, government taxes started witnessing a decline. The minimum price itself constituted the evidence that no duty/taxes have been paid on such supplies; moreover, there is no mechanism for online verification of payment of duty taxes on cigarettes being manufactured in AJ&K.