ISLAMABAD: Despite the increase in tax rates and graphical health warning on cigarette packs, illegal sales are increasing while the production and sales volume of the tax-paying cigarette industry is constantly shrinking.
Research reveals that despite a steady increase in government tariffs on cigarettes in Pakistan, there has been no significant decline in demand and sales of cigarettes, which is proving to be a challenge in the success of the government’s policy of making cigarettes expensive and out of reach.
Illicit cigarette consumption in the country is 32.6 billion sticks out of 80 billion sticks annually. The market share of the illicit cigarette trade is about 40 per cent in Pakistan, causing the national exchequer a loss of Rs70 billion annually through tax evasion.
These figures call into question the government’s policy of sticking to the only way to impose a tax on cigarettes to protect public health.
“These figures show that despite the government’s continued efforts to discourage smoking, demand and sales of cigarettes have remained stable over the years, with all credit going to illicitly sold cigarette brands which are giving smokers the opportunity to continue using cheaper cigarettes,” said an expert.
Former FBR chairman, Shabbar Zaidi, has also pointed out that products with higher tax rates are more prone to tax evasion and smuggling. According to Zaidi, cigarettes in Pakistan are also among the products on which the tax rate is more than 70pc.
Zaidi, a renowned tax authority in Pakistan, considers technology a more effective tool than tax measures to control the undocumented economy.
A review of sales statistics over the past four years shows that when tax on cigarettes was increased, a significant number of smokers shifted to low-cost and illegal alternative cigarette brands which are being sold at a price much below the government fixed price of Rs63.
According to industry experts, if the government is serious about curbing the trend of smoking in the country, it will have to curb the booming illicit cigarette trade and ensure strict enforcement of relevant laws on companies selling illegal cigarettes.
At the same time, obstacles in the way of technology-based track and trace systems have to be removed so that the damage caused to the public exchequer along with public health can be remedied.
