ISLAMABAD: The tax evading local cigarette manufacturing companies are wreaking havoc with the youth in Pakistan by luring them with low priced cigarette brands, and offering the sellers and consumers, incentives including cash prizes/gifts.
A latest survey revealed that multiple shops and khokas across Pakistan are openly selling cigarette packs of local tax evading manufacturers at a price of around Rs 20 to 40 per pack, which is far below the minimum mandated price of Rs 63 affixed by the government of Pakistan for a 20 cigarettes pack.
So much so, that these cigarettes are being sold at a price even less than the government’s mandated minimum tax of Rs 44 per pack.
The question arises as to how these companies can sell at prices lower than the minimum tax that they are bound to pay to the government on every pack?
According to the survey, Pakistan currently ranks among those countries that have the lowest cigarette prices in the world and it does not come as a surprise where 40 percent of the market is dominated by the local cigarette industry, which is selling cigarettes as low as Rs 20 per pack, while the government mandates that all sellers will not sell below Rs 63 per pack.
These local manufacturers evade billions of rupees due to non-payment of taxes, while at the same time, selling at a price that attracts the youth to initiate smoking. Statistics suggest that this illicit tobacco trade in Pakistan had risen to an alarming extent denting the government exchequer to the tune of Rs 77 billion annually.
Industry experts have suggested that illicit tobacco mafia is at an advantage every time there is a tax increase on the cigarettes as legitimate industry complies to the laws and increase their prices; however, illicit cigarette manufacturers do not comply with these laws.
Industry survey data shows that the prices of these tax evading brands have been consistent, selling between Rs15 – Rs40, in the past five years even though there has been an annual increase in the tax levied by the government on a 20 pack of cigarette.
The legal industry on the other hand has ensured compliance to all laws only to witness the tax evading manufacturers enjoy increased sales of their low priced cigarettes as the consumer continues to downshift to cheaper and low quality products.
If things continue to be this way and the focus remains on increasing the taxes and not on the enforcement of the existing laws and catching the tax evaders, the government will neither achieve its fiscal nor the health agenda, experts added.
Copyright Business Recorder, 2021