Tobacco sector concerned over illegal trade of cigarettes

ISLAMABAD-The legitimate industry would likely to shut down its business if it continues to be burdened with higher taxes. Estimates suggest that Pakistan is suffering huge revenue losses due to illicit trade in tobacco sector which is now touching almost 40% of total cigarettes consumption in the country. “The government is focusing on continuous increase in taxes on legitimate industry every year to manage the tax collection targets that seems to be a flawed approach when we see that ever increasing price gap between illegal cigarettes and legal cigarettes increases as price of legal cigarettes increases due to the increase in taxes every year,” a market analyst said yesterday. He said that the legal tobacco industry in Pakistan is paying almost 98% of the total tax collected from tobacco sector with only 60% share in the market. A declining legitimate market share affects the commercial viability of legal cigarette manufacturing operations in the country. “Phillip Morris International’s recent closure of its factory in Kotri was linked to the widening price gap between legal and illegal products,” he said. Almost 70,000 people are directly or indirectly employed in legal tobacco sector in Pakistan, he revealed and apprehended that with the possible closure of legal tobacco factories due to illicit cigarettes trade, livelihood of thousands of people would be at stake. He mentioned that there is also an increasing concern that illegal trade is related to other criminal activities, such as trade in narcotics, money laundering and terrorism. In case of continuous growth in illicit trade, there are chances that Pakistan will not only lose huge investments in tobacco sector but there will also be a worst impact on job market, he remarked.