Tax-evaded, smuggled cigarettes cause Rs240b loss
Cigarette traders illegally evade taxes costing Pakistan Rs 240 billion annually. Ipsos, the world’s third largest market research firm with presence in 90 markets, recently conducted a market analysis of illegal brands of cigarettes in Pakistan.
A survey of 1,000 stores in 10 districts, including Karachi, Lahore, Rawalpindi, Multan, Faisalabad, Gujranwala, Hyderabad, Peshawar, Bahawalpur and Sukkur, was conducted to assess and evaluate the viability and pricing of locally produced, duty-evading brands and brands names. trafficking brand. . . . .
The survey follows a significant increase in federal customs duties under the Financial Supplement Act, which was passed in February 2023. Under the Act, the government raised the rate of Tier I taxes by 154% and the Tier II tax rate was increased 146 percent.% . . . . .The sharp hike in domestic consumer prices is reportedly aimed at securing additional funds to meet IMF requirements.
Locally produced and smuggled duty-evading cigarette brands do not meet the requirements set by the Pakistani government, including the printing of health warnings, warnings for minors, retail prices and brand names. In addition, the marks are not subject to the FBR mark licensing policy and do not have any stamps required for tracking and tracing. The signs also violate the Federal Excise Code and the Sales Tax Act.
As per Ipsos survey, the overall market share of legal cigarette brands is 52% with Pakistan Tobacco Company holding 40% share and Philip Morris International holding 12% share.48% of the market is for illegal cigarette brands. Of these, domestically produced duty-evading brands had a 38% share of the illicit market while smuggled cigarettes had a 10% share.
When analyzing the tracking and tracing system for various cigarette brands, the study found that more than 83% of the sampled brands were sold without the state-mandated tracking and tracing stamp. According to the report, more than two-thirds of cigarette brands are sold below the legal minimum price set by the government, indicating that the authorities have failed to properly enforce tax laws.
