ISLAMABAD: The Pakistani government and health sector activists are grappling with a surge in smuggled cigarettes flooding both urban and rural markets, devoid of graphic warnings and sold below the minimum prices set by the Federal Board of Revenue (FBR). Qasim Tariq, Senior Business Development Manager of Pakistan Tobacco Company Limited (PTC), revealed a staggering estimate of over $1 billion or more than Rs300 billion in potential loss of government tax revenue due to the booming illicit cigarette trade.
Tariq, during a media briefing on Thursday, highlighted the alarming situation that emerged after a 200 percent increase in Federal Excise Duty (FED) on tobacco products in January 2022. Despite the presence of legal players such as PTC, Philip Morris, and Khyber Tobacco Company, their collective market share remains at a mere 37 percent. Shockingly, smuggled cigarettes now constitute 13 percent, while non-tax paid locally manufactured cigarettes have ballooned to 50.2 percent of the market.
He emphasized the urgent need for a government-led national anti-illicit tobacco strategy and the revitalization of a dedicated enforcement task force. Tariq asserted that these measures could curb the illegal trade, subsequently boosting government revenues. He raised concerns about the lack of FBR’s interest in curbing cigarette smuggling and halting the sale of packs lacking FBR tax stamps. Tariq warned that without stringent enforcement, revenue generated from the legitimate tobacco sector would be short-lived.
Despite the increase in excise duty, Tariq argued that it had inadvertently put business sustainability at risk. The lucrative black market in the cigarette sector continues to thrive, eroding the legitimate market share. He pointed out the vast price difference, with a packet of locally made dual-flavor cigarettes priced at around Rs650, while similar quality cigarettes from Dubai flood the market at a fraction of the cost, around Rs150 per packet.
The situation paints a grim picture for Pakistan’s tobacco industry and the government’s financial health. Urgent and decisive action is needed to curb the illicit trade, protect public health, and safeguard the nation’s economy.
