Smuggled cigarettes causing loss of billions to national exchequer
The government has failed to control the illegal smuggling of cigarettes.
ISLAMABAD: The government has failed to counter the illegal smuggling of cigarettes that is continuously making the country bear the loss of more than one billion per annum.
According to the industry sources, one out of four cigarettes sold in Pakistan is illegal either smuggled or local duty-evaded. Such cigarettes now account for more than 25% of the total market. This means more than 1 billion duty-evaded cigarettes are sold each month.
During the current financial year, the legitimate industry is projected to contribute more than $ 800 million as excise and sales tax. Massive tax evasion by illicit cigarettes significantly undermines this key source of government revenues. This widens the fiscal and budgetary gap and keeps Pakistan dependent on foreign aid and loans”.
In 2011, illicit trade cost the government Rs.18.5 billion in lost tax revenues. Between 2007 and 2011 the total loss to national revenue due to sale of these contraband cigarettes was more than Rs. 80 billion. In the next 5 years, loss to national tax revenues due to sale of tax-evaded cigarettes is projected to be more than Rs.100 Billion. Hence, the situation is going to go south in future.
Sources added that the illicit trade in cigarettes has grown exponentially in recent years. In the last 5 years alone there has been an alarming increase of more than 60% in sale of such cigarettes. Without a game changing course of action adopted by the authorities to curb this menace, this black market in contraband cigarettes is expected to grow and matters will worsen further in the times to come.
Sources said that the only solution to stop these ever increasing gaping holes in the national exchequer is through striking at the distribution network.
It means tactical and calculated hits at storage points and warehouses which are inside the country and well known. According to the law any police officer can undertake this task.
Anyone who possesses, sells, or even offers for sale, a pack of cigarettes without the prescribed health warning can be prosecuted and sentenced to jail for 2 years.
This means that the law is sufficiently clear and strict. Laws are already in place to govern each step of cigarette industry’s supply chain. With appropriate political will and increased resources existing laws are sufficient for tackling this black market.
