Pakistan Tobacco Company (PTC) has expressed serious concern over the recent mini-budget announcement, stating that new taxes on cigarettes will result in an increase in smuggling and counterfeit products in markets. Speaking to the media on Friday, PTC’s Director Legal and External Affairs, Syed Asad Shah, explained that the increase in federal excise duty (FED) and the lower minimum price set by the Federal Board of Revenue (FBR) would lead to less revenue collection from the cigarette industry.

Shah displayed several illicit cigarette packs available in markets across the country, including some smuggled brands without health warnings, counterfeit products of local brands, and unregistered and non-tax-paid locally produced cigarettes.

Shah projected that the share of illicit cigarettes in Pakistan would increase from the current 35 per cent to 40-50 per cent in the current year. He added that if the government did not rationalize the policy of managing the threshold price level and did not restrict illicit trade, its revenues would also decline after two years. Illicit cigarettes are sold below the minimum price because the applicable tax per pack is not paid on these products.

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The cigarette industry paid total taxes of Rs150 billion in fiscal year 2021-22, and the expected tax receipts this year would be around Rs185 billion because of the new taxation measures. According to the industry, tax contribution by PTC and Philip Morris, two multinational companies, alone will be around Rs182 billion.

Shah pointed out that around 35 cigarette companies were running in Pakistan, making some 200 brands, but local players paid only Rs3 billion in taxes and duties. He added that many companies were not paying due taxes, which was why some were selling cigarette packs for Rs7.

PTC officials emphasized the need for a rational increase in the minimum legal price of cigarettes. After the recent rise in FED, taxes, and duties on tier-2 cigarette packs came in at Rs101, but the minimum sale price of the same packs was Rs108.

According to Express, the company officials demanded that the finance ministry take stringent action against the illicit cigarette trade and ensure across-the-board implementation of the FBR’s track and trace system that monitors the production and supply of cigarettes.