Local tax evading cigarette brands denting economy

Islamabad : The local illicit cigarette manufacturers are luring youth with low-priced illegal brands, complain industry experts.

According to them, shopkeepers in major markets of urban centres are openly selling illegal cigarette packs with a price of around Rs15-Rs35, which is far below the minimum price of Rs62.76 set by the law for a 20-cigarette pack.

More than 200 local illicit cigarette brands are selling at Rs20-Rs40, while the minimum tax per pack is Rs42.12 and the minimum price is Rs62.76.

The experts told ‘The News’ that the minimum tax and minimum price law violations compromised the government’s fiscal objectives as well as the public health agenda.

They insisted that consumers bought illegal cigarettes as their manufacturers, by evading both excise and sales taxes, were able to offer them at lower prices making them much more affordable than the legal tax-paid cigarettes.

The experts said illicit cigarette manufacturers not only dented the economy but also mocked the national health laws of the country.

According to a study, around 1,200 children between the ages of 6 and 15 take to smoking every day in Pakistan but the government and relevant institutions need to gauge the exact cause of this smoking trend.

The experts expressed concern about the rising trend of smoking in youth and wondered how an underage child could buy cigarettes.

They asked if every underage child was buying a complete cigarette pack or the option of loose cigarettes was available to him so that he is using his pocket money to get one or two sticks.

The experts said who the culprit was, cigarette price in general, or weak law enforcement.

They said law-enforcement agencies failed to keep a check on shopkeepers to stop them from selling illegal brands, which were available around 20-35 rupees for 20 cigarettes packs and secondly also stop them from selling loose cigarettes, thirdly take stern action against shopkeepers involved in the sale of cigarettes to minors.

The industry experts believed that the illicit cigarette manufacturing mafia will be at an advantage if the tax increases as tax-paying manufacturers will comply and increase their prices but illicit cigarette manufacturers do not comply with this which leads to a consumer downshift to cheaper and low-quality products.

Former chairman of the Federal Bureau of Revenue Shabbar Zaidi opined that the tobacco sector has a potential of Rs150+ billion revenue generation with strict implementation on rules and regulations, curbing the smuggling of imported brands of tobacco products and stopping the sale of locally manufactured non-tax paying brands.

The experts urged the government to come up with a long-term strategy to combat the tobacco ‘mafia’ and control the fiscal leaks saying the initiative will not only help increase tax collection but also block the children and youth’s access to low-cost brands and loose cigarettes.