As cigarettes are highly taxed in Pakistan because of their harmful effects on public health, the government is losing billions in revenues that it could otherwise collect on legal import and sale of tobacco products.
According to insiders, 200 truckloads of smuggled goods including cigarettes enter the country every day from across the Afghan border. They blame government agencies and customs officials for lack of a strict check and allege the activity goes on with the connivance of some of them.
Industry sources confide that almost Rs50,000 are given to Afghan and Pakistani officials as bribe for clearing a single consignment.
Estimates suggest that Rs18 billion worth of cigarettes is smuggled into the country every year, besides tea worth Rs16 billion, petroleum products valuing Rs22 billion including smuggled LPG, auto parts and vehicles valuing Rs25 billion and other products of over Rs200 billion including cosmetics, clothing, footwear, medicines, spices, juices, electronics, etc.
The government is facing the huge loss of revenue apparently in the absence of concrete steps to stem the illegal trade.
Talking to The Express Tribune, spokesman for the Federal Board of Revenue (FBR) said intelligence agencies and customs officials had taken action and raided some markets and warehouses of smuggled cigarettes.
“As a result, sale of duty-paid cigarettes has increased in the country,” he said, pointing out that monitoring teams had been active to stop smuggling from Afghanistan under the transit trade.
A customs official, however, was of the view that it was extremely difficult to stop this illegal traffic on the long porous border. Government’s control in tribal areas close to the border had been weak under normal circumstances and it was now even more weaker because of the poor security situation there, he said. “However, it does not mean that there is no way to check the illegal inflow of cigarettes.”
He suggested that the government needed to focus on two areas – enhancing the effectiveness of the system that was in place to confiscate smuggled cigarettes at entry points and seeking higher level of monitoring by the excise department.
“It should begin by holding them accountable for the glut of smuggled cigarettes in local markets,” a senior government official said.
In recent years, according to market sources, the sale of cigarettes smuggled from Afghanistan has increased as consumers are attracted by the low prices for better quality.
Smuggled cigarettes are being sold for Rs25-30 per pack, whereas after payment of duties and taxes it will cost around Rs70.
“It is hard to believe that such large-scale trade in illegal cigarettes has gone unnoticed by the tax officials,” a market player commented.
About 20% of total cigarette trade comprises smuggled or counterfeit products on which taxes are not paid by unscrupulous elements, who are also involved in cultivating low-quality tobacco and producing fake and substandard cigarettes, posing serious health risks to the consumers.
On the other hand, 25 licensed cigarette factories are running in the country, which provide direct employment to over 22,000 people, indirect employment to 87,377 people and purchase the crop from 71,000 farmers.
Published in The Express Tribune, January 27th, 2014.