- Special Pages
KARACHI: The government suffered a loss of Rs80bn in tax revenue during the last five years, while this loss would be Rs100bn in the next five years as Pakistan ranked third highest in illicit trade in the Asia-Pacific countries, behind Malaysia and Hong Kong.
According to a Euromonitor International report on illicit trade in cigarettes, this trade reached a peak of 23.5 billion sticks in Pakistan last year. These local duty-not-paid, smuggled and counterfeit cigarettes represented 26.7 percent of Pakistan’s total cigarette consumption in terms of volume, it revealed.
The report suggests that Pakistan’s huge illicit cigarette trade is fuelled by two key components, comprising high tax incidence coupled with weak enforcement of anti-illicit trade laws. Taxes make up 68.5 to 81 percent of the retail price of a cigarette packet, which is considerably high given low purchasing power of average Pakistani consumers.
This in turn inflates price differential between legal and illicit cigarettes, creating a natural shift away from legitimate trade as smokers can easily purchase duty-evaded and cheap cigarettes at a fraction of the duty-paid price, it showed. While laws and regulations aimed at controlling illicit cigarette trade are in place, it seems that these are not enforced appropriately.
Especially crippling is the lacking sense of criminality associated with the illicit trade. This is highlighted by the fact that 84.5 percent of all illicit cigarettes comprise local duty-non-paid.