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May 9, 2020

‘Govt can recover billions on untaxed cigarettes’

Business

May 9, 2020

LAHORE: Phillip Morris Pakistan Managing Director Roman Yazbeck has said the government could recover Rs45-Rs50 billion from the untaxed tobacco sector through law enforcement agencies.

In an online discussion with a group of journalists from different cities of Pakistan, he said the share of non-tax paid cigarettes has increased to 45 to 50 percent from 33 percent after increase in excise and taxes by the government during the last two consecutive years by 53 and 23 percent.

He said minimum consumer price of legal tax paid cigarette pack was Rs63, while an illegitimate brand was being sold at Rs25/pack. The government increased excise duty on cigarettes by 53 percent in fiscal year 2018-19 and 23 percent in 2019-20, while only two multinational players were paying 98 percent of total taxes from the tobacco industry.

Yazbeck believed that the government could collect Rs45-Rs50 billion from the untaxed tobacco products through law enforcement.

The government needs more revenue for development spending which was its right. However, squeezing the legitimate sector by increasing excise and duties would not achieve the target, as consumers switch to cheaper products.

The argument of reducing cigarette consumption by increasing the price has proved wrong across the global markets as well as in Pakistan. “Rather, it adversely affected the government revenue collection from the regulated sector, as unregulated sector flourished with such taxation measures,” he added. Quoting the example of Romania, he said that an increase in excise and taxation was made by their government and in 18 months the share of non-tax paid tobacco products increased, while government revenue was hit with no decline in consumption.

He said increase in tax on tobacco products was part of protecting public health, as smoking is bad for health. However, this increase in taxes should be reflected in consumption pattern of the tobacco products.

“If increase in taxes is not reducing the tobacco products consumption, than the government must look into the matter and come up with other solutions to reduce its consumption,” he observed.