Immediate steps needed to stop tax evasion by illicit cigarette sector

ISLAMABAD  -  Philip Morris Pakistan Limited (PMPKL) has underscored the urgency for immediate measures to tackle the escalating presence of low-priced non-tax-paid ciga­rettes, which has resulted in a loss of a level playing field and a sig­nificant decline in volumes within the legitimate tobacco sector.

In a media briefing in Islamabad to address the profound chal­lenges gripping the tax-paid ciga­rette industry in Pakistan, Head of Communications at PMPKL An­dleeb Uroos Ahmed, highlighted an alarming 86% decrease in total income for the fiscal year 2023, shedding light on the detrimen­tal impact of Federal Excise Duty (FED) hikes and the escalating market share of non-duty paid il­licit cigarettes in the country.

Andleeb Uroos Ahmed elabo­rated that substantial excise in­creases tend to inflate the prices of tax-paid cigarettes, further exacerbating the price gap as the tax-evading sector disregards these hikes. This scenario has provided ample opportunity for numerous local illicit cigarette manufacturers, notably in Khy­ber Pakhtunkhwa (KPK) and Azad Jammu & Kashmir (AJ&K), to amass substantial market share while contributing mini­mally to national revenue.

Statistics unveiled during the briefing painted a stark picture of a massive surge in illegal ciga­rettes across Pakistan after the FED hike in February ‘23, with il­licit cigarettes now commanding a staggering 63% market share and causing an annual dent of approximately PKR 310 bil­lion to the exchequer. While ac­knowledging government efforts such as the introduction of tax stamps (track & trace system) to combat illicit tobacco trade, she expressed deep concerns about the lack of across-the-board en­forcement, allowing the non-tax-paying industry to flourish.

Stressing the critical need for decisive action to safeguard the interests of tax-paying entities and ensure sustainable revenue collection for the government, she suggested including tax-evading cigarette manufactur­ers in the tax net instead of bur­dening the legitimate industry with additional taxes.

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