Not homemade: Pakistan consumes 22.8% of the region’s illicit cigarettes

Study says estimated tax loss goes down by $31 million in 2013.

PESHAWAR:

The Asia-14 Illicit Indicator 2013 report suggests Pakistan’s domestic illicit cigarette consumption again accounted for a significant proportion of total illicit consumption in 2013, albeit a little less than 2012.

According to the report prepared by International Tax and Investment Center and Oxford Economics, three quarters of such consumption occurred in just three of the 14 markets studied: Pakistan (22.8%), Philippines (18.1%), and Vietnam (20.7%).

According to a handout issued on Wednesday, several government agencies, including Inland Revenue Intelligence, customs intelligence, police, Federal Investigation Agency and the Rangers, have been tasked with the eradication of illicit tobacco trade but the trade of illicit cigarettes has not be curbed so far. This failure is often reflected in low collection of sales tax and federal excise duty (FED).

However, Asia-14 states, “Pakistan, and Singapore saw noticeable declines in the share of Illicit Consumption in 2013, the former a result of declining domestic illicit volumes.”

The study calculated Pakistan’s consumption of illegal cigarettes went down from 21.8 billion to 18.1 billion. Resultantly, it’s estimated tax losses reduced from $261 million to $230 million.

Some economic observers believe the shortfall in revenue caused by trade in illicit cigarettes can cause a knee-jerk reaction by the Federal Bureau of Revenue (FBR) to look into the tax paying of the corporate sector.

The handout stated the declining share in the market for the legitimate tobacco products results into lower collections for FBR. Pakistan saw an increase in the market share of illicit tobacco products since 2009 when the FED was increased.

Published in The Express Tribune, October 16^th, 2014.