‘Policy implementation vital to curb illegal cigarettes’

Stakeholders project annual losses of Rs240b to national treasury

LAHORE:

Despite the introduction of the technology-based “Track and Trace system” to combat illicit tobacco trade in Pakistan, a significant number of illegal tobacco companies have yet to install the system, resulting in massive losses to the national exchequer.

According to the industry stakeholders, the cigarette industry in Pakistan faces a major challenge with high rates of illicit trade and tax evasion, causing an alarming annual loss of Rs240 billion to the national treasury. Surprisingly, only two regulated cigarette companies contribute 98% of the taxes in this sector, while the remaining 52 companies, comprising 48% of the market share, contribute a mere 2% in taxes.

To address this issue and enhance tax collection, industry experts emphasise the government’s immediate action against smuggling and tax evasion within the tobacco industry. Leveraging modern technology, strengthening enforcement, and ensuring the collection of advance tax at the threshing level are vital steps to reduce illicit tobacco, said Muhammad Awais Ashraf, Head of Research at Foundation Securities. However, the implementation and enforcement of these policies are missing from the system, lamented Ashraf.

Despite over 50 companies being registered with the Pakistan Tobacco Board, only a few have implemented the track and trace system. The northern region of the country, particularly Azad Jammu and Kashmir and Khyber-Pakhtunkhwa (K-P), has become a hotspot for illicit production and trade of cigarettes. Moreover, influential individuals owning cigarette companies in K-P are contributing to national exchequer losses through illegal production and sales.

Stakeholders and industry experts warned that the illicit cigarette trade not only burdens the national treasury but also poses a significant hindrance to the government’s health policies aimed at protecting public health.

“To achieve the desired results in curbing illegal activities, a uniform and effective implementation and enforcement of present policies throughout the cigarette industry is essential,” emphasised Ashraf.

By ensuring the proper implementation of policies and leveraging modern technology, Pakistan can effectively tackle the illicit cigarette trade and safeguard its financial and public health interests.

Published in The Express Tribune, August 2^nd, 2023.

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