The Pakistan Tobacco Company (PTC) has expressed concerns about the newly announced mini-budget, stating that increased taxes on cigarettes will increase smuggling and counterfeiting. The PTC Director of Legal and External Affairs, Syed Asad Shah, expressed his concern that the increase in federal excise duty (FED) and lower minimum price set by the Federal Board of Revenue (FBR) would result in a reduction in revenue collection from the tobacco industry.
In order to highlight the growth of the illegal cigarette trade, Shah displayed a number of illicit cigarette packs, including smuggled brands without health warnings, imitations of local brands, and locally produced cigarettes produced without paying taxes. He predicted that if the government does not rationalise the threshold price level and impose restrictions on illicit trade, the share of illegal cigarettes in Pakistan, which is currently 35%, will rise to 40–50% this year.
Due to the fact that illicit cigarettes do not pay the applicable tax per pack, their price is lower than the minimum. The cigarette industry reported paying taxes totaling Rs 150 billion in the fiscal year 2021–2022; however, due to new taxation measures, it is anticipated that tax receipts will be closer to Rs 185 billion this year.
Shah noted that only Rs3 billion in taxes and duties were paid by local players despite the fact that about 35 cigarette companies producing 200 brands were operating in Pakistan. He demanded that the finance ministry take tough action against the illegal cigarette trade and make sure that the FBR’s track and trace system, which keeps an eye on the supply and production of cigarettes, is implemented uniformly.
After the recent increase in FED, taxes, and duties, tier-2 cigarette packs came with a price tag of Rs101, but their minimum sale price was set at Rs108. PTC officials stressed the need for a reasonable increase in the minimum legal price of cigarettes. Officials from the company warned that if the government didn’t change its approach to controlling the threshold price level and curtailing illicit trade, revenues would start to fall after two years..