Tobacco revenue may cross $2bn mark by curbing illicit trade

LAHORE: The government has the potential to generate $2 billion revenue from the legitimate tobacco industry by collecting taxes and bringing illicit tobacco manufacturers into the tax net.

"The government aims to collect Rs 280 billion in taxes from the legal tobacco sector in the current fiscal year 2023-24. Also, by bringing illicit tobacco manufacturers into the tax net, it could inject an additional Rs 310 billion into the government's coffers, potentially equivalent to $2 billion," said Fawad Khan, spokesperson for ‘Mustehkam Pakistan,’ an advocacy platform safeguarding the interests of marginalized and low-income communities.

Fawad said, "As Pakistan grapples with fiscal challenges, addressing the pervasive issue of illicit tobacco trade, which costs the exchequer a staggering Rs 310 billion in lost tax revenue, is crucial." He highlighted that the illicit tobacco trade, which currently holds a significant 63-percent market share, thrives on evading taxes and duties, depriving the government of crucial resources required for infrastructure development and providing essential services like healthcare and education to the population.

He maintained that illicit tobacco trade fuels organized crime, perpetuating a cycle of corruption and undermining the rule of law. By cracking down on illicit tobacco trade, Pakistan can disrupt criminal networks, enhance law enforcement efforts, and promote a more transparent and accountable business environment, he added.

Syed Saifullah Kazmi, Head of Investment Banking at Inter-market Securities, said the potential revenue gains from curbing illicit tobacco trade present a significant opportunity for Pakistan to address pressing socioeconomic challenges and invest in the country's future. By harnessing these funds for infrastructure development and providing basic facilities such as health and education, Pakistan can foster inclusive growth, improve living standards, and pave the way for a brighter future for its citizens", reasoned Kazmi.

Copyright Business Recorder, 2024