Excise duty structure fuels counterfeit cigarette use: report

Estimates annual revenue losses of Rs310b, calls for govt strategy to combat illicit sales

ISLAMABAD:

The current excise duty structure on tobacco products has led consumers to shift from legally compliant cigarette brands to illegal, tax-evaded ones, causing an estimated annual revenue loss of Rs310 billion for the national exchequer. Illicit cigarette brands now hold over 60% of the total market, as revealed in a report titled “Illicit Cigarette Trade in Pakistan – Current Situation and Way Forward,” released by the National University of Sciences & Technology (NUST).

The report was formally launched at a local hotel ceremony attended by Federal Minister for Defence, Khawaja Muhammad Asif, and Dr Rizwan Riaz, the Pro-Rector of Research Innovation and Commercialisation at NUST. They were briefed on the intricate challenges facing the cigarette industry, including administration, revenue collection, policy coordination, and market dynamics, exacerbating tax revenue losses.

Despite the implementation of the Track and Trace System (TTS) aiming to curb illicit trade, the report indicates a surge in illicit cigarette sales. By 2024, the illicit sector’s market share is projected to surpass 60%, overshadowing the legitimate sector. To address this, the report urges the government to devise a comprehensive strategy encompassing excise duty reforms, adjusted price thresholds, intensified law enforcement against non-compliant brands, and consistent implementation of the TTS. The report underscores the significance of bolstering law enforcement, particularly in areas like Azad Jammu and Kashmir, to curb the infiltration of tax-evaded brands, which constitute 90% of illicit cigarette trade.

During his speech, Asif stressed that the effectiveness of the Track and Trace system hinges on robust retail-level enforcement, expressing plans to review and enhance the system’s efficacy.

Published in The Express Tribune, May 22^nd, 2024.

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