Govt’s policy of taxing cigarettes not proving fruitful

KARACHI - According to the experts, with every step to increase the taxes on cigarettes, a significant portion of smokers move to low-priced illegal cigarettes.
They said that the government’s policy of taxing cigarettes to generate revenue, and make them inaccessible to the public is not proving fruitful due to the illicit trade in cigarettes. It is pertinent to mention that the market share of illicit cigarettes manufactured in the country has reached 40%, due to which the government is facing a loss of Rs 80 billion annually due to illegal trade in cigarettes alone.
Annual cigarette sales in Pakistan have been hovering around 80 billion cigarette sticks for last several years, proving that the policy of reducing the smoking trend through tax hikes has failed due to illegal cigarette companies. Former Chairman FBR Shabbar Zaidi has also cited high tax rates as a major cause of illicit trade in Pakistan. He said that in Pakistan cigarettes are the leading item in terms of economic losses of illicit trade.
According to statistics, last fiscal year, Pakistan collected Rs 150 billion in taxes from cigarettes, while a target of Rs 200 billion has been set for the current financial year. However, it would not be that easy for government to generate revenues to the tune of Rs200 billion from the tobacco sector because increased prices of cigarettes were highly likely to shift customers to cheap illicit brands. Experts said that FBR has introduced a track and trace system to curb cigarette illicit trade. The success of the trace and track system requires that other laws and policies related to the tobacco industry be applied uniformly throughout the industry.
Cigarettes manufactured in Azad Jammu and Kashmir and Khyber Pakhtunkhwa are being sold across the country much below the government-mandated minimum price. Such a difference in price is possible only if taxes on cigarettes are not paid.

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