PM Orders Countrywide Crackdown on Illegal Cigarettes

Prime Minister Imran Khan has expressed his concern over growing illegal trade of cigarettes in Pakistan and has ordered to a countrywide crackdown on the illicit import of cigarettes.

The country suffers an annual loss of Rs. 30-40 billion because of the illegal tobacco trade, as it is hurting the documented and compliant sector. The recent increase in illicit trade is undermining various measures taken by the government to effectively address this public health issue which is also causing considerable losses to the national exchequer on account of tax evasion.

According to a letter issued from the Prime Minister’s Office, tobacco use is one of the major causes of serious illnesses and death in Pakistan.

Keeping in view its health and economic implications, the prime minister has taken a serious note of the above situation and has been pleased to desire that a country-wide crackdown be launched against the sale of illicit cigarettes on priority.

According to the data, the illicit cigarette trade in Pakistan comprises smuggled cigarettes and locally manufactured cigarettes, the former is openly available in the market without the mandatory graphical health warning, while the latter is available at price points of Rs. 20-35, which is less than the government-mandated minimum price of Rs. 62.76.

PM Office has directed the Ministry of National Health Services, Regulation and Coordination and Federal Board of Revenue to submit a monthly progress report on the operation, the letter added.

The country suffers an annual loss of more than Rs. 30-40 billion because of the illegal tobacco trade. Currently the market share of illicit cigarettes, majority of which are locally made, stands at 33 percent while the share of tax-paying industry is 67 percent, however, the local manufacturers are contributing to only 2 percent of the total tax collected from the tobacco industry.

In the financial year 2018-19, the national exchequer received a tax contribution of Rs. 115 billion from the cigarette manufacturing industry out of which Rs. 113.5 billion was paid by two multinational companies while the local tax-evading manufacturers, having a 33 percent market share, paid only Rs. 1.50 billion in FY 2018-19.

Back in 2017, a similar approach was adopted where a dedicated task force called Inland Revenue of Enforcement Network (IREN) was set up to counter the illegal trade. It is important to mention here that 1.5 billion illicit cigarettes were seized during 2017-18 by IREN, which had reduced considerably over time. Similar efforts by the current government will help curb this illicit trade.

As per the Oxford Economics Study, Pakistan is ranked 1st in the illicit trade of cigarettes in Asia with a total volume of 326 billion illicit cigarettes consumed in 2017.