Illicit tobacco trade boom pinned on poor enforcement

ISLAMABAD: Illicit tobacco trade is denying the country billions of rupees worth of revenues mostly because of soft-hitting laws and lack of enforcement, experts said on Wednesday.

Such views were voiced by the speakers at a roundtable discussion titled ‘Illicit Tobacco Trade: Need for Implementation of Law & Regulatory Regimes’, organised by Center for Global and Strategic Studies (CGSS), Islamabad.

Major General Hafiz Masroor Ahmed (Retd), Vice President, CGSS, in his opening remarks said a lot of studies had been conducted on this issue, establishing the fact the impact of illicit tobacco trade was enormous in terms of revenue.

“In our current policy, many new initiatives are being incorporated to tackle this issue,” Ahmed said.

Maryam Raza, Research Associate, CGSS, said according to a report by IPSOS around 65 percent of all tyres in Pakistan was smuggled.

“Small traders who hold 40-50 percent market share contribute massively to tax evasion, while real estate is where evaded/black money is parked.”

Counterfeit medical drugs and illegally smuggled medicines were the biggest challenge for law-enforcement agencies to combat, Raza said.

“Tax evasion is carried out through the illegal trade of tobacco and has three main strands, each having its own estimation of losses to national exchequer and additional violations of several other laws in the country,” she added.

Mohammad Jehanzeb Khan, Deputy Chairman, Planning Commission of Pakistan commended CGSS for organising this timely discussion, saying, “Today, we will bring to spotlight, the important public policy matters”.

“In recent times, we have not seen any significant decrease in the in the illicit tobacco trade.”

Khan said the key element and question was the ability to enforce and curb tax evasion and illicit tobacco availability and the enforcement structure of the country.

“The policy must be relooked in a proper structured manner and must be long-term,” the deputy chair of the planning commission said. Zahid Latif, Chairman, Islamabad Stock Exchange said only two tobacco companies paid 98 percent of total tax tobacco collection.

“The remaining 40 percent companies pay a meagre two percent tax,” Latif said.

Dr Ikram Ghani, former Chairman Pakistan Tobacco Board, said there was no denying that today illicit tobacco trade was on the rise.

“The price differential between the duty paid and local NDP cigarettes is leading to a further inclination towards consumption of illegally produced cigarettes.” Today 40 percent of cigarettes sold in the country were illicit, Ghani said.