Tobacco companies post massive profits yet tax collection remains stagnant

ISLAMABAD: The three big tobacco companies, two multinationals and one local manufacturer, have posted massive quarterly profits while tax collection on the products remain stagnant. The three major tobacco companies that have posted significant profits clearly showing increased sales since cigarettes prices have not increased since 18 months.

All these three companies are listed on Pakistan Stock Exchange, therefore all their data is publicly available. According to the official data, Khyber Tobacco Company has reported a 44 percent yearly growth in gross turnover for the financial year ended June 30, 2020 to Rs140 million.

The data shows that Philip Morris (Pakistan) Limited has reported a 53 percent yearly growth in gross turnover for the post-budget quarter ended September 30, 2020 to Rs8.2 billion.

This is presumably due to higher number of cigarette packs sold in the quarter. The net turnover, however, had a much bigger jump of 103 percent year-on-year to Rs3 billion, as the FED rate (equal to share of excise duty in gross turnover) decreased from 52 percent in Jul-Sep 2019 to 45 percent in Jul-Sep 2020.

The market leader Pakistan Tobacco during the Jul-Sep quarter, it scored a strong gross turnover growth of 27 percent and net turnover growth of 41 percent year-on-year.

The World Health Organisation said that tobacco kills up to half of its users while over 80 percent of the world's 1.3 billion tobacco users live in low and middle income countries including Pakistan.

The profits of these three big companies clearly show that number of smokers are rapidly increasing in Pakistan, a growing burden on health infrastructure and increased annual deaths, Sanaullah Ghumman, General Secretary of Pakistan National Heart Association [PANAH], said. He accused that the companies present factually incorrect data to the public and policy makers to benefit their shareholders.

Copyright Business Recorder, 2020