ISLAMABAD: Pakistan’s Defence Minister Khawaja Muhammad Asif said on Tuesday that Pakistan has a capacity to generate Rs27,000 billion in terms of taxes and the country will not need IMF support if it only collects half of this tax.
Speaking at the launching session of the research report titled ‘Illicit Cigarette Trade in Pakistan – Current Situation and Way Forward’, produced by the National University of Science & Technology (NUST), he said that it is absolutely saddening that counterfeit cigarette manufacturers are members of the assemblies and they watch guard their business’s interests through these assemblies.
He said that two major cigarette manufacturers are contributing Rs170 billion in taxes while the share of all the other cigarette manufacturers is just Rs2 billion.
NUST research report on the tobacco sector revealed that Pakistan is losing Rs310 billion annually due to tax evasion in the tobacco sector.
During the session, the audience was briefed on the complex challenges in administration, revenue collection, policy coordination, and market dynamics, of the cigarette industry which are causing major tax revenue losses for the national exchequer.
Moreover, the inadequate enforcement of existing laws, policies, rules, and regulations has further bolstered the illicit sector, the report noted.
Reducing Illicit Cigarette Trade in Pakistan
While quoting the efficacy of the Track and Trace System (TTS) under the government’s enforcement regime, the report said that the TTS had been aimed at reducing the levels of illicit trade in Pakistan. Contrary to that goal, the illicit trade has increased since its implementation. This increase in illicit cigarette trade is feared to cause the market shares of the illegal sector to exceed 63 percent of the total market in 2024, leaving a dwindling legitimate sector share, the report added.
To counter the challenges faced by the legitimate tobacco industry, the report urged the government to come up with a well-thought-out strategy including, a modified price threshold, excise duty structure reforms, increased enforcement of the law against sales of non-compliant brands, and consistent and extensive implementation of TTS.
Increased law enforcement, particularly in the areas like Azad Jammu and Kashmir could help reduce infiltration of local tax-evaded brands into Pakistan, which is the main component of the illicit cigarette trade with a share of 90 percent, the report suggested.
