Illegal tyres & tobacco causing Rs130bn loss to exchequer: officials

LAHORE: Smuggled tyres and illegal tobacco trade are causing a huge revenue loss of Rs130 billion annually to the national exchequer, said customs sources.

Due to under-invoicing and smuggling, they said, the illegal trade of tyres is becoming a burden of Rs50 billion annually on the national treasury, while the national treasury is facing a loss of Rs80 billion annually due to the illegal trade of cigarettes.

It may be noted local tyre industry is facing a huge threat of survival in the shape of smuggling as the total estimated value of smuggled tyres comes over Rs300 billion which results in the loss of over Rs50 billion to the national exchequer.

“Tyre is one of the top commodities which are being smuggled into Pakistan, thus ruining local industry badly and causing huge losses to the national treasury,” they said.

Meanwhile, sources from the industry said if this 60% smuggling is controlled, this gap could be filled by local manufacturers and legal imports and ultimately the government would get its legitimate revenues, which is a need of time. On the other hand, they added, the national exchequer is also facing a loss of Rs80 billion annually due to illegal cigarette trade.

Meanwhile, legal investment in the cigarette industry is also at stake along with the country’s economy. Due to high taxes on cigarettes in Pakistan and the lack of strict action against the elements involved in illegal trade, the market share of illegal cigarettes is increasing rapidly, they said.

According to the statistics of the cigarette industry, 80 billion cigarettes are sold annually in Pakistan. Two out of every five cigarettes sold in the country are sold illegally and the overall market share of cigarettes, which causes tax evasion reaching 40%.

The track and trace system has been implemented to prevent tax evasion on cigarettes, but apart from a few cigarette manufacturing companies, a large number of cigarette manufacturers are out of this system.

According to the experts, the government can collect additional resources without burdening the people with taxes in the recent economic crisis by curbing illegal trade and smuggling in two important sectors like tyres and cigarettes.

The annual revenue of Rs130 billion stolen from the tyre and cigarette industry can be spent on helping flood-affected communities and restoring infrastructure.

Copyright Business Recorder, 2022