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LAHORE: Former Finance Minister and PML-N leader Miftah Ismail has suggested levying taxes on the purchase and processing of tobacco along with import of cigarette paper could bring illegal cigarette manufacturers under the tax net.

While speaking at a webinar on illegal trade, the PML-N leader said, “Instead of imposing new taxes to reduce the budget deficit, the government should focus on increasing the tax net and curb tax evasion.” He acknowledged the fact that illicit cigarette trade is hurting the economy and suggested that the government needs to change its tax strategy to counter it.

Highlighted that the illegal cigarette factories in FATA do not pay taxes, he said the cigarette factories in FATA are all dependent on illegal trade. He alleged that those who make money from the illicit trade buy Senate seats and maintain their political influence. In such a situation, the track and trace system may also fail as it would only be able to track and trace cigarettes manufactured by legal companies, which are already under tax net, he said.

Miftah also said that the rate of duty on imported paper for cigarettes also needs to be balanced as in case of extraordinary increase, this paper would start coming to Pakistan through illegal sources, especially Afghan transit trade.

It may be noted that the FBR had proposed a mandatory adjustable tax of Rs 300 per kg on tobacco being processed by the green leaf threshing (GLT) units, to be paid to FBR along with the name of the cigarette manufacturer. The directive was, however, reversed after pressure from groups. The illicit trade in cigarettes in Pakistan is a major cause of revenue deficit. The volume of illicit trade in cigarettes is growing rapidly due to the high rate of taxes on cigarettes.

According to a recent report, the annual loss of illicit cigarette trade in Pakistan has reached approximately Rs 80 billion. The market share of illegal cigarette trade in the country has increased to 40 percent. The growing illicit trade is not only denting the economy but a serious challenge for the government’s anti-tobacco policies.

Copyright Business Recorder, 2021

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