Cigarette industry: FBR seeks to generate extra Rs185bn revenue thru FED, GST

ISLAMABAD: The Federal Board of Revenue (FBR) has estimated to generate additional revenue of around Rs185 billion through federal excise duty/sales tax from cigarette industry during 2023.

Capital Calling, a network of academic researchers and professionals, has stated that some cigarette makers are trying to mislead government into lifting these taxes from the sector.

It says that the government should stand firm on its decision to raise taxes on the tobacco products.

Rubbishing a recent statement by a multinational company representative, the network states that it is unrealistic to develop a causal relationship between higher taxes and sale of illegal cigarettes.

The report stated that the cigarette industry paid Rs150 billion tax in the fiscal year 2021-22, and the expected tax receipts this year would be around Rs185 billion.

Citing a survey by a civil society group, it says that only less than 15 percent of the market share goes to illicit cigarette consumption.

One in six cigarette packs consumed in Pakistan could be illicit. “These figures are far less than those propagated by the tobacco industry,” it says.

The network cited a research by the University of Cape Town and the Ministry of Health Pakistan that concludes that only 13 percent of cigarettes consumed in Pakistan are illicit.

According to the Pakistan Tobacco Board, the tobacco industry contributes over Rs200 billion annually to the country’s economy.

The illegal cigarette trade, estimated to be worth around Rs26 billion annually, deprives the government of much-needed revenue through taxes. This is contrary to the claim of Rs70 billion annually, it states.

The illicit cigarettes in the market are basically from the multinational brands, indicating that these multinational tobacco companies are beneficiary of this illegal activity in one way or the other. These illicit cigarettes are sold at higher prices as imported brands. However, local brands suffer the most in a market flush with illegal international tobacco products.

Capital Calling states that there is a need to bring cigarette taxes in Pakistan at a par with the world. It said that the country is still counted among those that have put the least taxes on cigarettes.

“Multinational tobacco companies may prioritize their interests over public health and disregard their products’ negative societal impact,” said an anti-tobacco activist in academic institutions.

Copyright Business Recorder, 2023