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Pakistan top Asian country in illicit cigarette trade

By Our Correspondent
December 22, 2018

KARACHI: Pakistan has emerged as the top country in Asia with illicit cigarette trade amounting to 32.6 billion cigarettes annually, with 41.9 percent of total cigarette trade being illegal in the country, a report by Oxford Economics showed.

“Asia Illicit Tobacco Indicator 2017: Pakistan” made available to media by Philip Morris International on Friday said Pakistan was losing more than Rs50 billion in taxes to illegal trade in the country.

Total consumption (legal and illicit) was estimated at 77.8 billion cigarettes in 2017, falling by 10.3 percent in comparison with 2016. Of this, an estimated 58.0 percent was legal domestic consumption, 0.1 percent was non-domestic legal, and the remaining 41.9 percent was estimated to be illicit consumption.

Illicit consumption continued to be primarily composed of domestic illicit cigarettes in 2017. Domestic illicit accounted for nearly three-quarters of all illicit cigarettes consumed in 2017, the data showed.

Illicit consumption declined by an estimated 14.0 percent in 2017 to 32.6 billion cigarettes, underpinned by an 11.4 percent decline in domestic illicit and a 20.5 percent fall in non-domestic illicit. “This is the first time since 2013 that illicit consumption has fallen in Pakistan,” the report said.

The decline in illicit consumption coincides with a series of regulatory and enforcement initiatives aimed at reducing the volume of illicit cigarettes consumed in Pakistan.

In January 2017, the Federal Board of Revenue (FRB) constituted a joint committee for the monitoring, vigilance, and scrutiny of the cigarette/tobacco sector in response to the rise in illicit consumption, and in recognition of the links between tobacco smuggling and financing terrorism.

The committee, known as the Inland Revenue Enforcement Network (IREN), was tasked with monitoring and developing strategies to combat the illegal cigarette trade. In the first year of operation, IREN seizures amounted to 1.63 billion non-duty-paid cigarettes and raw tobacco. In July 2017, the FED was restructured with the introduction of a third low-tax-tier in an attempt to encourage producers of illicit tobacco to formalise and become better regulated.