Pakistan: Illicit Cigarette Trade Results In Rs24 Billion Lost In A Year

With an outrageous growth rate of 43.5% over the past six years, illicit cigarette trade is responsible for a quarter of the gross trade leading to a yearly loss of Rs24 billion to the national exchequer.

As a result, Pakistan has being moved to fourth position in Asia with regards to the share of illicit trade in the overall trade of the product.

Nielsen, a global market research firm responsible for documenting consumer behavior in more than 100 countries, confirmed this information through a research report on illicit cigarette trade in Pakistan.

Based on the report, 23.7% of the overall cigarettes’ trade in Pakistan was illicit and goes undetected by the tax net. Local tax-evaded (LTE) in cigarette consumption accounts for 17.3 billion. This reflects as 89% of the gross illegal cigarette trade. The remaining value is as a result of smuggling. Also in the report is the fact that 2 billion cigarettes are smuggled, mostly from Afghanistan to Pakistan, on a yearly basis.

Be it illicit trade in cigarettes in the form of smuggling, local tax evasion or counterfeit, it has become a global phenomenon with one in every ten cigarettes and tobacco products reported as illicit. In 2013, Pakistan ranked 4^th in Asia by reason of its illicit cigarette share in the total cigarette market in the country.

With huge differences in price, many consumers are reaching for illicit substitutes. Afghanistan’s pricing and regulatory differences contributes to the major inflow of smuggled cigarette into Pakistan plus the high profit margin that retailers enjoy by selling illicit products also furnishes the growth of such tax-evaded products.

Interestingly, the report showcases the fact that manufacturing and distribution of LTE cigarette in Pakistan is not some hidden agenda but instead an explicit and developed supply chain was in operation to guarantee the availability of such products countrywide.

According to the report, manufacturing cigarette independently was an intricate process while marketing huge quantities requires several operations.

The mass un-declared raw materials, including tobacco crop, cigarette paper and filter rods assists in the understated volume of cigarettes manufacture which in the end, aids in the evasions of excise duty and sales tax on cigarettes.

Nielsen Pakistan Senior Manager, Jawwad Riaz, in discussing the issues, stated that the price differences between legal and tax-evaded cigarettes were the severe issue that the government was facing.

He claimed that there 13 agencies and 25 laws in operation to limit illicit trade. However, records prove that irrespective of the apparent deterrent procedures, illicit trade was booming.

Short URL: https://www.newspakistan.pk/?p=52878

Posted by modousarr on May 5 2016. Filed under Pakistan. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.