Zubair Yaqoob
Karachi
A simple survey at any shop across the country will reveal that there are several unknown brands of cigarettes being sold at as low as Rs30 – Rs40, which is below the legally set price of Rs63 per pack of 20 cigarettes. It is a widely known fact that increasing taxes on cigarettes discourages smokers. However, when policies and law enforcement are not aligned, there are those that may take advantage and find ways of evading taxes, and working angles for their own benefit with no regard for the government.
Unfortunately, due to these gaps in checks in balance, the policy makers, sometimes inadvertently, end up achieving the opposite result. Due to weak enforcement, the share of illicit cigarettes, especially duty-not paid has increased rapidly in the past 2 years alone and stands at much as half the market. With no specific measures targeted to bring the untaxed tobacco sector into the tax net in the current federal budget means a big victory for the illicit cigarette manufacturers and traders. Moreover, manufacturers of illicit cigarettes are making the most of the government’s blind eyes as they are also manufacturing and selling counterfeit cigarettes with the name of well-known brands. These cigarettes are sold at the same price as that of the legal brand–giving the illicit manufacturers abnormal profit margin since their cost of manufacturing is much lower and no taxes are due. According to industry reports the Government of Pakistan is losing anywhere from Rs44bn to Rs 77bn a year in taxes due to these tax evading cigarette manufacturers.
