Pakistan’s major tobacco industry caused a whopping loss of Rs153 billion to the national exchequer from 2016 to 2019 as it was levied low tax rate and allowed price adjustment of their most sold brands.
This was said by Malik Imran Ahmad from Campaign for Tobacco Free Kids while addressing the participants of a a session on ‘Loss of Revenue Because of Deceptive Tactics of Tobacco Industry” organized by Society for the Protection of the Rights of the Child (SPARC), Human Development Foundation (HDF) and Pakistan National Heart Association (PANHA) here on Friday.
He said that after the introduction of the third tier, around 160 billion cigarettes were produced between May 2017 and March 2019.
Big tobacco companies share 75pc of the total market, which means they were able to sell 120 billion cigarettes in the same period. Loss of revenue due to introduction of the third tier (low tobacco taxes) is Rs77.85 billion from 2016 to 2019 while loss of revenue due to Price Adjustments stands at Rs75 billion from 2018 to 2019.
According to Malik, local manufactures of cigarettes have their representation in the Senate and the National Assembly and big companies even approach the Prime Minister to plead their case regarding taxation on tobacco products, Malik said.
Waseem Saleem, Senior Economist, Social Policy and Development Centre (SPDC) said the large fiscal imbalances in Pakistan required greater tax revenues. Tobacco taxation can positively contribute to government revenues, he said adding simultaneously, these taxes will also help promote public health objectives.
He added that the level of under-reporting of cigarette production in Pakistan has significant negative implications for government tax revenue. Revenue loss due to undeclared production is estimated to be Rs 31 billion while by including GST revenue, it becomes Rs 37 billion (considering the average FED rate of Rs 1.93 per cigarette in 2016-17, calculated by dividing total revenue by the volume of sales). He also added that the volume of illicit trade is very low as compared to the claims made by the tobacco industry.