The Ministry of National Health Services, Regulations and Coordination with the help of the Federal Board of Revenue (FBR) will have to take appropriate measures to check daily consumption of 87 million illicit cigarettes in Pakistan, reflecting serious violations of health laws/rules and regulations by the 'illicit' industry. Data collected by Business Recorder revealed that alarming figures of consumption of 87 million illicit cigarettes on daily basis cannot be ignored by the Health Ministry. These illicit cigarettes mainly included non-duty paid cheap cigarettes whose sale is openly violating all kinds of rules and regulations of the Ministry of Health.
As per Oxford Economics Study, Pakistan ranks at the 1 position in illicit trade of cigarettes in Asia, with a total volume of 326 billion illicit cigarettes consumed in 2017. The primary reason for existence of illicit manufactures is the tax-driven price differential between legal and illicit brands, which currently stands at 130%. The figure of consumption of 87 million illicit cigarettes in Pakistan has been calculated on the basis of the said report.
The Ministry of National Health Services, Regulations and Coordination is the prime government department with the powers and mandate to monitor cigarettes produced in Pakistan and all relevant nonfictions and regulations have been issued by the said ministry. Interestingly, no government department including Federal Board of Revenue (FBR) and Health Ministry or NGOs, etc, has any authentic data on actual use and consumption of illicit cigarettes sold in the country. However, FBR's Inland Revenue Enforcement Network has the authentic data of seized illicit cigarettes at different places in the country.
However, the focus of all government departments particularly Federal Board of Revenue (FBR) is to maximise revenue collection from tobacco sector. The FBR has acknowledged the fact that two multinational cigarette manufacturing companies would contribute over Rs 115 billion to the FBR by the end of 2018-19, reflecting contribution of record revenue from documented tobacco sector.
However, the most dangerous aspect in consumption of illicit cigarettes is the blatant violations of the health regulations by manufacturers of NDP cigarettes as well as non-payment of applicable rates of Federal Excise Duty under FED slabs notified by the FBR.
Ministry of Health had proposed imposition of 'Sin Tax' on tobacco industry and beverages to generate additional revenue. At the same time, apparently there is no system in the Health Ministry to check or control or monitor the manufacturers, suppliers, sellers and impact on consumers of illicit production of cigarettes. Moreover, in the absence of authentic data on illicit trade consumption of cheap cigarettes in the country, this huge consumption has not only destroyed the documented industry but also serious health problems for those consuming illicit cigarettes in Pakistan.
Health tax is another form of excise tax which will again increase prices of legitimate brands but have no effect on the 40 percent illicit market that will continue to sell even below the minimum price in the country. Therefore, the enforcement against this black market is necessary and coordination amongst various departments is necessary to take inputs and industry on board.
Health Ministry cannot ignore the fact of huge consumption of illicit cigarettes in the country. Furthermore these illicit cigarettes violate other health laws such as advertising, targeting youth, giving gifts, incentives and lucky draws, all of which are prohibited under the ministry laws.
The violation of these laws is a criminal offence; however, no action is ever taken in this regard, an expert raised question.
However, it is not clear that why Ministry of Health cannot take action against the manufacturers of these cigarettes. The cigarette industry of Pakistan mainly comprises two manufacturers and more than 20 registered local cigarette manufactures. These two companies contributed Rs 89 billion in excise duties and taxes during fiscal year 2017-18, constituting 98 percent of the cigarette excise revenue.
The Prime Minister and finance minister have both acknowledged the presence of illicit cigarettes in Pakistan.
Currently in Pakistan, tax increases are counterproductive in achieving the government's revenue and health objectives since they are encouraging people to smoke cheaper cigarettes that are more affordable. This results in attracting the youth to initiate smoking due to cheap prices as 1 cigarette is available for Re 1.
A number of NGOs are very active on tobacco control although it is amazing how they have never raised any issues on the violation by these small manufactures which are the biggest threat to tobacco control. Such organisations have not raised voices against the menace of illicit trade.
Prime Minister Imran Khan in his public address on the completion of 100 days in government said, "Only two tobacco companies with a market share of around 60 percent contribute 98 percent of the tobacco tax collection, whereas all other tobacco companies operating locally contribute only 2 percent to the national exchequer despite having a market share of about 40 percent."
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