ISLAMABAD: Despite the introduction of a third slab on cigarette prices, the Federal Board of Revenue (FBR) has been losing revenue and is most likely not to achieve the revenue target of Rs126 billion during this year, it was learnt.
Well informed sources in the cigarette industry disclosed to Pakistan Today, that the FBR is lagging far behind in achieving the revenue target of Rs126 billion from the cigarette sector during this year. They disclosed that FBR is expected to achieve only about Rs100 billion instead of Rs126 billion by the end of current fiscal year. They also said that although a third slab was introduced on cigarette prices during the last year, FBR has so far not received what it got back in revenues from the cigarette industry when two tiers of taxation were in place.
The sources informed that the introduction of a third tier of taxation on cigarette prices has so far resulted in an increase in the revenue of Multinational Companies (MNCs) as the consumption of their brands of cigarette increased while almost 10 local cigarette factories closed down. Illicit trade of smuggled/non-duty paid cigarettes has also increased due to the closure of the local industry, said sources.
“The MNCs are wiping out local producers from the market due to the current policies implemented by FBR,” said sources.
As per available data, the revenue target of tobacco sector for the year 2013-14 was Rs88.4 billion, Rs102.88 bln for 2014-15, Rs114.19bn for 2015-16, Rs83.69b for 2016-17, and Rs126bn for 2017-18, despite introduction of tier-III taxation on cigarette price.
Sources in the tobacco industry have informed that since there is no federal excise duty imposed on cigarette brands of MNCs operating in the country, the FBR blatantly favours these companies and their executives.
Similarly, sale of smuggled cigarettes belonging to global MNCs has continued in the open market without any pictorial warnings. They said that all over the world, domestic and local investors are protected by their respective governments. Even President Trump has also capitalised on that and promised his voters of moving from a free economy to protectionism. However, in Pakistan a complete opposite of international practices has been happening for a very long time, and because of current policies by the FBR, multinationals are wiping out local producers, said sources.
It is relevant to mention here that the Ministry of National Health Services (NHS) is keen to end the third slab introduced by FBR as it increased tobacco consumption after prices of cigarettes were lowered. The ministry (NHS) has now proposed to the finance division to eliminate the third slab of cigarette category before the upcoming budget as the country is stepping towards adopting a tobacco-free generation policy. The ministry, in connection to this, has clearly asked the finance division to end the third tier from cigarettes in the upcoming budget.
The prices of cigarette were increased in 2013-16 in two slabs. However, in May, the FBR introduced the third slab after multinational companies reported a decline in their production and the government collected less revenue from the industry. Also, the rate of federal excise duty on the first tier of cigarettes is Rs3705 per 1,000 cigarettes while Rs1,649 per 1,000 cigarettes in the 2nd tier.
Reportedly, every year, over 160,100 of the people in the country are killed by tobacco-caused diseases. Still, more than 125,000 children (10-14 years old) and 14.73 million adults (15+ years old) continue using tobacco each day. Currently as per reports from a summit in Cape Town (South Africa), deaths from cigarettes in Pakistan have amounted to 1,60,000.
It is worth mentioning here that Pakistan was a signatory of the World Health Organization (WHO) Framework Convention on Tobacco Control (FCTC). And, under the treaty, the government is bound to increase taxes to reduce tobacco consumption in the country.
