The illicit cigarette trade in Pakistan is growing due to poor enforcement and a lack of awareness among retailers, according to a new study by Umeed-i-Sehar, a non-profit group focused on public health.
The report, based on a survey of 2,000 retailers in major cities including Karachi, Lahore and Islamabad, found that 97 percent of respondents had never been contacted by Federal Board of Revenue officials for compliance checks. About 86 percent were unaware of the penalties for selling untaxed cigarettes.
Only 27 percent of retailers said they could tell the difference between legal and illicit cigarette packs. Most relied on price as the main indicator of legality, with 86 percent pointing to low cost as their deciding factor. Just 12 percent looked for the official tax stamp.
The report also showed that 73 percent did not understand the purpose or location of tax stamps.
In terms of inventory, 59 percent of retailers said 30 to 60 percent of the cigarette packs they sold lacked tax stamps. Another 29 percent estimated that more than 60 percent of their stock was illegal.
These numbers suggest that retailers play a key role in distributing illicit products, which continue to cut into the market share of tax-paying companies. Pakistan’s tobacco industry includes more than 50 manufacturers and an estimated annual consumption of 80 billion sticks.
The Federal Board of Revenue launched the TransAct App to allow retailers to check the validity of tax stamps, but the study found that 98 percent of retailers had never heard of it and 99 percent had never used it. The report also noted that 43 percent of retailers said consumer promotions for cheaper cigarettes affected their purchasing decisions.
Another 31 percent pointed to strong demand and low prices as key reasons for stocking untaxed brands.
