The Public Accounts Committee (PAC) has recommended raising the tax on imported cigarettes, stating that it could potentially generate additional revenue of Rs. 300 billion.
The chairman of the Federal Board of Revenue (FBR), while briefing the committee, said that the tobacco sector generates Rs. 160 billion in taxes annually. The committee was further briefed that there is a further capacity for tax collection of up to Rs. 60 billion from the cigarette industry.
The Chairman of the FBR informed the committee that Rs. 157 billion, or 98 percent of the tax (on cigarettes), comes from only two multinational companies, while 20 other companies contribute Rs. 3 billion in tax. He said that the general sales tax (GST) on both local and imported cigarettes is 17 percent. Apart from this, federal excise duty is being collected on these products, he added.
During the fiscal year 2021–22, Rs. 132.17 billion was collected from the Pakistan Tobacco Company (PTC) in overall taxes, including Rs. 96.4 billion in federal excise duty, Rs. 28.4 billion in sales tax, and Rs. 7.4 billion in income tax.
Moreover, during the same year, Rs. 24.97 billion was collected from Phillip Morris in overall taxes, which included Rs. 18.5 billion in federal excise duty, Rs. 5.9 billion in sales tax, and Rs. 572 million in income tax.
The committee was further briefed that the tax on tier one cigarettes is Rs. 6,500 per 1,000 sticks; the tax on tier two cigarettes is Rs. 2,050 per 1,000 sticks and the regulatory duty per pack of imported cigarettes is 65 percent.
The committee members said that a tax of Rs. 41 is being collected on local and imported cigarette packets, and the Chairman of the committee recommended further increasing the tax on imported cigarettes to increase revenue.