ISLAMABAD: The government and health sector activists have failed to control widespread smuggling of cigarettes that are openly sold in urban as well as rural markets without graphic warnings and even below the minimum prices set by the FBR.

“The potential loss of government tax revenue due to smuggled and other illicit cigarette trade is estimated to be more than $1 billion or more than Rs300 billion,” said Qasim Tariq, senior business development manager, Pakistan Tobacco Company (PTC).

Briefing media here on Thursday, he said that after the increase of more than 200 per cent in Federal Excise Duty (FED) on tobacco products in January 2022, the share of illicit as well as smuggled cigarettes had surged.

The PTC representative said there were three legal players in the sector: PTC, Philip Morris and the Khyber Tobacco Company.

But their collective market share is only 37 per cent whereas the share of smuggled cigarettes has grown to 13 per cent and the non-tax paid locally manufactured cigarettes swelled to 50.2 percent.

Mr Tariq added that the government-led national anti-illicit tobacco strategy and enforcement task force could help reduce illegal trade in tobacco sector and help grow government revenues.

He said for the first time in Pakistan’s history, potential government revenue loss due to the illicit sector would be surpassing the total revenue to be collected from the legitimate industry by the end of this fiscal year.

He said that the on-ground situation shows that FBR was less interested to curb cigarette smuggling and stop the sale of cigarette packs without the tax stamps of FBR.

“Without any enforcement, revenue generation from the legitimate tobacco sector would only be shortlived,” he said.

While the increase in excise has enhanced revenue collection, it only lead to putting business sustainability at risk because the lucrative black marketing in cigarette sector is enhancing its market share.

He said the retail price of one packet of locally made dual flavour was around Rs650 whereas the similar quality cigarettes made in Dubai were available in Pakistan at around Rs150 per packet.

Published in Dawn, October 13th, 2023