The federal government is reportedly bearing a loss of Rs. 5.7 billion every year due to fake tax stamps on cigarette packs.
This has been revealed by Qasim Tariq, Senior Business Development Manager Pakistan Tobacco Company in a media briefing. He said that around 850 million counterfeit cigarette sticks are currently being sold all across Pakistan including major metro cities like Karachi, Lahore, Islamabad, and Rawalpindi.
This figure stands equivalent to 42.5 million packs featuring fake stamps, resulting in a substantial loss of approximately Rs. 5.7 billion to Pakistan, he added.
Tariq expressed deep concerns over the sustainability of its business as a result of inappropriate policy measures and the alarming rise in illicit trade.
The recent data released by the Pakistan Bureau of Statistics, Large Scale Manufacturing (LSM) Index, has highlighted a significant and concerning trend within the legitimate tobacco sector.
According to the latest statistics, the production of the legitimate tobacco sector has fallen forty times more than the overall LSM Output from July 2023 to November 2023, however, the consumption of cigarettes has remained stagnant. This distressing trend underscores the adverse impact of policy decisions that have disproportionately affected the legitimate tobacco industry.
A comprehensive and balanced approach to ensure a level playing field for the legitimate tobacco sector is imperative to ensure long-term sustainability.
Despite the implementation of a Track & Trace System (TTS), the rising incidence of fake stamps being affixed on counterfeit packs of leading cigarette brands was also a key issue shared by the representatives.
Rising counterfeit draws serious questions on the efficacy of the much-lauded track and trace system which is yet to be implemented across local cigarette manufacturers in Pakistan and Azad Jammu & Kashmir (AJK).
The representatives urged the Law Enforcement Agencies (LEAs) with jurisdiction to conduct extensive enforcement at the retail level against this rising menace.
The representatives also shared their concerns about a recent misleading report making rounds in the media about missed revenue collection by FBR. The claims made in the report, are not only false but also raise questions regarding the intentions behind publishing such a report.
The report claims that the illicit sector is less than 10% across Pakistan. Surprisingly, this number goes against even what the FBR itself claims of illicit trade being more than 36.2 percent for the period in question.
Secondly, the report claimed that government revenue declined due to fiscal changes in the excise structure but stopped short of revealing the complete picture. Between 2012 – and 2016, the government switched to a 2-tier structure from a 3-tier Structure which was implemented in Pakistan in 1992. This caused revenues to fall by more than 25 percent due to the above-inflation excise increase in 2015-16 and illicit trade hovered close to 50 percent of the market, as it is today.
To curb the menace of illicit trade the government decided to re-introduce a 3-Tier system which not only increased revenues by more than 40 percent but also discouraged illicit cigarette trade.
Extensive government-led national anti-illicit trade strategy, effective fiscal measures, and strict enforcement against illicit trade across the value chain with a key focus on the retail level is the need of the hour.