National exchequer losing Rs140b every year due to cigarettes smuggling

LAHORE   –  Stop Illegal Trade (SIT) has welcomed the Prime Minister’s attention to the economic damage caused by the illegal trade of cigarettes in Pakistan.

Stop Illegal Trade, an organisation working to curb illegal trade in Pakistan, welcomed Prime Minister Imran Khan’s directives to the Federal Board of Revenue and relevant authorities on the illicit trade of cigarettes in the country, which is causing Rs.140 billion annual loss to the national treasury.

As per report submitted in the cabinet meeting, the national exchequer is losing Rs 140 billion every year due to smuggling of cigarettes. The Prime Minister took notice of the issue of cigarette smuggling and sought a report from the FBR and concerned authorities.

Amna Saleem, representative of SIT, said, “The Prime Minister’s will to eradicate illicit trade and smuggling from the country is promising and we are hopeful that it will yield results.” She said that while smuggling is a big challenge indeed, an even bigger challenge is the local manufacturing of non-compliant tax-evading cigarettes by companies which have elaborate setup schemes between Khyber Pakhtunkhwa and Azad Kashmir; they exploit the lack of enforcement against local non-compliant manufacturers by selling cigarettes for less than the government mandated pack price, a violation of the tax laws.

“Both smuggled and locally manufactured non-compliant illegal cigarettes are causing damage to the economy. Although the FBR has taken action against the movement of illegal cigarettes and confiscated consignments in different parts of the country, however, no action has been taken against the illegal cigarette manufacturing companies,” she opined.

Adding further, Amna said, while Prime Minister has focused on smuggling alone, he should also focus on this home-grown mafia of illicit cigarette manufacturers, who continue to sell locally-manufactured tax-evading cigarettes.

There are more than 50 tobacco companies in Pakistan. “Only two tobacco companies, with a market share of around 60% contribute 98% of the tobacco tax collection, whereas all other tobacco companies operating illegally contribute only 2% to the national exchequer despite having a market share of about 40%.”

Continuing on about the smuggled cigarettes, SIT’s representative demanded enforcement of Custom Auction Rules to destroy the confiscated smuggled cigarettes and Import Policy Order to prohibit sale of cigarette packs which do not comply with local packaging requirements. “Even after a year of the amendments being made in the law, we still continue to see smuggled cigarettes being sold in the market”, she said. 

“More alarming is the presentation of distorted facts by certain organizations – which completely contradict the findings from this report presented in the cabinet – on trade of illegal cigarettes,” she said while adding that a special committee should be formed, to not only research and determine the accurate impact of the illicit cigarettes trade in Pakistan but also ensure enforcement of laws to counter illegal trade.