ISLAMABAD: In line with Prime Minister Shehbaz Sharif’s anti-smoking policy, the Customs with the Ganjamndi police in Rawalpindi seized a large cache of smuggled cigarettes on Sunday, estimated to be worth Rs8 million. The cigarettes were found in a warehouse in the Ganjamundi area and were being stored without paying customs duties.
The seizure of smuggled cigarettes is a major victory for the Shehbaz government's efforts to curb the illegal trade of tobacco products in Pakistan. The government has recently increased taxes on cigarettes in an attempt to discourage smoking, and the illegal trade of cigarettes is a major source of revenue loss for the government.
The police action came after a tip-off from a local resident. The police raided the warehouse and found the cigarettes, which were packed in boxes and ready for sale. The cigarettes were all foreign brands not procured through legal channels.
The police have arrested the owner of the warehouse, and are investigating how the cigarettes were smuggled into the country. They are also investigating who the intended buyers of the cigarettes were.
These measures are a result of Prime Minister Shehbaz Sharif's directives to combat the illegal tobacco trade in Pakistan. Health advocates argue that the Federal Board of Revenue's Track and Trace system has effectively limited illicit trade to below 15%. They recommend that all companies adopt this system to reap further benefits. The tobacco industry manipulates the inflated percentage of illicit trade to influence policymakers into avoiding tax increases proportional to inflation.
Tobacco-related diseases impose an annual economic burden of Rs615 billion, equivalent to 1.6% of Pakistan's GDP. Despite causing such significant damage to public health and the economy, the tobacco industry audaciously opposes any measures aimed at mitigating the harm. Activists emphasized that every budget season, the tobacco industry exploits the issue of illicit trade to prevent increases in tobacco taxes.
This serves as a smokescreen to divert attention from their underreporting practices. These companies deliberately understate their production and sell unreported products on the black market, resulting in billions of losses for the national treasury. Imran referred to recent research on illicit cigarettes in Pakistan, which revealed that around 15% of cigarette packs were illicit.
The government has finally started controlling illicit trade through broader controls, raids and implementing trade and trace across the board.
We appreciate the Govt efforts and the steps will go a long way in increasing revenue from the tobacco sector and the same time will bring down the consumption of tobacco.
Health advocates argue that the tobacco industry should not resist paying additional taxes, as they never actually bear the burden themselves. Tobacco companies have raised their prices excluding taxes, leading to the excise tax share in the retail price remaining at 51.6%, well below the widely accepted benchmark of 70%. Tobacco is the leading cause of preventable deaths in Pakistan, claiming the lives of over 170,000 people annually. Imran explained that increasing prices reduce production and consumption, thus alleviating the burden on public health costs. Although there has been a 31.7% decline in tobacco production reported by the tobacco industry in the fiscal year 2022-23 compared to the previous year, this is a win-win situation in line with the objective of tobacco control to reduce consumption while generating increased revenue.
The government's decision to raise the Federal Excise Duty (FED) on cigarettes in February 2023 resulted in an additional 11.3 billion FED revenue in the fiscal year 2022-23, along with an extra 4.4 billion VAT revenue. This additional revenue of 15.7 billion amounts to 0.201% of our GDP, providing a significant boost for a struggling economy like Pakistan.
The tobacco industry claims to conduct cutting-edge research to address Pakistan's economic challenges. However, in reality, the only cutting-edge aspect of the industry is its production of lethal products that jeopardize both the health and economy of Pakistan. It is a fallacy to believe that Pakistan can thrive while tobacco products continue to prevail.