FBR urged to investigate smuggling of imported cigarettes

ISLAMABAD: The Federal Board of Revenue (FBR) should immediately investigate allegations whether the imported cigarettes by the international companies also contain any consignments of non-customs duty paid smuggled cigarettes?

Tax experts told Business Recorder that according to the Pakistan Bureau of Statistics, Pakistan imported 15,907 metric tons of tobacco and tobacco products, including a small number of cigarettes, in 2020-2021.

However, not all foreign cigarettes sold in Pakistan are labelled as imported to misdirect the regulators. A cigarette pack imported to Pakistan will never look different to a cigarette produced in Pakistan due to health regulations.

However, most smuggled cigarette brands do not have an Urdu health warning or the approved pictorial warning.

The government has been taking measures to curb smuggling and encourage legitimate imports to support the local economy, but smuggling of international brands needs strict monitoring on the Afghan border.

The question arises whether some international tobacco companies are unethically stealing millions from Pakistanis by packaging smuggled products as imported and selling them at a premium rates?

The smuggled pack of 20, sold as imported, cost Rs800, while the same product made in Pakistan is sold for Rs500.

As per consumers, “People like us assume that the price disparity is because it’s an imported cigarette, and therefore due taxes and import duties have been paid on it.

We are paying extra for a ‘superior’ product, but there’s no difference in quality between Pakistani and imported cigarettes,” consumers argued.

“For a locally-made product, the company pays Rs390 as tax per pack of their product, which they sell for Rs500 to consumers. But if they label a smuggled product as imported, they can easily grab Rs800 from the customer without paying anything to the government,” explained Dr Rashid, an economist.

There’s no value addition for that extra Rs390 we are paying. “The main difference was the tobacco age, with the Pakistani cigarettes being fresher than smuggled,” added Dr Rashid.

According to Dr Rashid, there is a niche market for these smuggled products, which are not cheap. “The price of Rs800 indicates that if Pakistani tax rises to Rs500 or even more, customers would still buy Pakistani-manufactured cigarettes at Rs800.

At the same time, the big companies continue to complain that taxes are too high,” he added.

Copyright Business Recorder, 2023