Sale of illicit cigarettes on the rise in Pakistan
KARACHI: The sales of illegal cigarettes in Pakistan have risen significantly due to a considerable increase in federal excise duty (FED).
Speaking during a meeting with journalists in Karachi, Chief Financial Officer of Philip Morris Pakistan Muhammad Zeeshan stated the widening gap between taxes on legal and illegal cigarette sales has resulted in Pakistan becoming the second-largest country in Asia for the sale of illegal cigarettes, following Malaysia.
Zeeshan emphasized that without curbing the illicit cigarette trade, an increase in FED would not be effective as the entire burden of taxes falls on the legal cigarette industry. He urged the government to apply laws uniformly across the entire industry, implement track and trace across all companies, and provide an environment in which an organised, tax-paying industry can thrive.
Furthermore, Zeeshan noted that the impact of the significant increase in excise duty has already begun to affect the legal cigarette industry, and the government will also face negative impacts in the form of reduced tax revenue from cigarettes.
The sale of legal cigarettes has reportedly declined by 50% in the first quarter, while illegal cigarette sales have increased. The recent excise duty increase has doubled the price difference between legal and illegal cigarettes, and it is estimated that the government will not be able to achieve its tax collection target of Rs260 billion from the tobacco industry, resulting in a collection of only Rs170 billion.