Illicit tobacco sector outgrows legitimate one

Sales of illegal cigarettes rise to 63% of total volumes since duty hike

ISLAMABAD:

Since the revision of federal excise duty on tobacco products early this year when the duty was increased more than 200%, the sale of illegal cigarettes has swelled to more than 63% of total volumes, signalling the illicit sector has outgrown the legitimate one, revealed the data shared by Pakistan Tobacco Company (PTC) representatives in an interaction with media.

The government-led national anti-illicit tobacco strategy and revitalisation of the dedicated enforcement task force could help reduce illegal trade and help grow state revenues, the PTC representatives stressed.

For the first time in history, the potential government revenue loss due to the illicit sector would be surpassing the total revenue being collected from the legitimate industry in FY24.

“The loss of potential government tax revenue to the black economy is estimated to be more than $1 billion or more than Rs300 billion,” said Qasim Tariq, Senior Business Development Manager at PTC.

It is expected that volumes of more than 11 billion cigarettes would be lost by the legitimate tobacco sector due to many consumers preferring tax-evaded and smuggled cigarettes.

PTC representatives showcased month-by-month shipment data since FY21-22. Volumes of the legitimate sector have reduced by more than 55% from January 2023 to June 2023, raising concerns of business sustainability.

Published in The Express Tribune, October 14^th, 2023.

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