ISLAMABAD: The documented tobacco industry has estimated to pay Rs242 billion federal excise duty/sales tax in the national kitty, whereas, increased share of illicit cigarettes will cause an annual loss of Rs300 billion during 2023-24.
While briefing the media here on Thursday, the representatives of the Pakistan Tobacco Company (PTC) said the enforcement of the government seems to be focused on sugar, petroleum products, and foreign currency, but less priority to tobacco products.
The share of illicit cigarettes would increase the projected revenue from the tobacco sector.
The overall volume of the tobacco industry is estimated at 81 billion sticks, out of which, the share of illicit was expected to touch 51.4 billion sticks while the share of taxpaying tobacco manufacturers is going to shrink to 29.4 billion sticks. “Alone in the ongoing fiscal year, the volume is projected to decrease by 11 billion sticks bringing it down from 42.4 billion in the last financial year to 29.6 billion in the current fiscal year,” they added.
Since the revision of FED tobacco products with an increase of more than 200 percent in the last financial year 2022-23, the tobacco sector had swelled to more than 63 percent of the total volume of cigarettes resulting in the illicit sector outgrowing the legitimate sector, revealed the data shared by PTC’s representatives.
The government-led national anti-illicit tobacco strategy and revitalising the dedicated enforcement task force could help reduce illegal trade in the tobacco sector and help grow government revenues, PTC representatives stressed.
For the first time in Pakistan’s history, potential government revenue loss due to the illicit sector would be surpassing the total revenue to be collected from the legitimate industry in the fiscal year 2023-24. The loss of potential government tax revenue to the black economy is estimated to be more than $1 billion or more than 300 billion rupees, Qasim Tariq, the senior business development manager for PTC said while sharing the data.
It is expected that the volume of more than 11 billion cigarettes would be lost by the legitimate tobacco sector due to downtrading by consumer to tax-evaded and smuggled cigarettes.
The PTC representatives showcased month-by-month shipment data since FY21/22. Volumes of the legitimate sector have reduced by more than 55 percent from Jan ’23 till June ’23, raising concerns of business sustainability.
Commenting on recent media reports suggesting a boost to government revenue collections from the tobacco industry, Tariq said the on-ground situation needed to be factored in to develop a comprehensive policy to tackle this menace.
Copyright Business Recorder, 2023