ISLAMABAD: Despite a regulatory regime in place to reduce smoking in Pakistan, the government has not been able to achieve its desired results.

Figures highlighted during a presentation on Wednesday revealed that between 2008 and 2013, smoking incidence in Pakistan was reduced by 0.2pc, while the consumption of illicit tobacco brands grew by 24.8pc.

The presentation by Nielson Pakistan was part of an interactive workshop on the ‘Illicit Cigarette Trade in Pakistan’, organised by Communication Research Strategies (CRS) for journalists to develop a clearer understanding of the burgeoning illicit cigarette trade in Pakistan.

The study found that with increasing regulatory and fiscal burden on the tax paid segment, more and more consumers are switching to the illicit substitutes that are either cheaper, due to tax evasion, or non-compliant, due to lack of health warnings.

It said: “During 2008 to 2013 period, the tax-paid segment volume declined by 10.1pc and the illicit segment volume grew by 24.8pc.”

Workshop participants say illegal tobacco trade causes billions in revenue loss, encourages smoking among youth

Speaking at the event, Nielson Pakistan senior manager Jawwad Riaz said the price differential between legal and “tax evaded” cigarettes is a significant challenge for the government in its pursuit of a level-playing field for the legal tobacco industry.

“One in every four cigarettes in the country is illicit. In Pakistan alone, nearly 19.5 billion illicit cigarettes were consumed in the year 2014, out of which 17.3 billion or 89pc were local non-duty paid. More than two billion cigarettes are smuggled into Pakistan as well and added into the illicit trade each year,” he said.

“Overall, 23.7pc of the total cigarettes annually sold in Pakistan are illicit. In addition to billions in revenue loss to the government, local non-duty paid cigarettes undermine the country’s public health objectives by giving easy access to youth and encouraging youth smoking by selling cigarette packs below the minimum tax payable on a cigarette pack. Shortly put, the pervasive illicit cigarette trade continues to grow by leaps and bounds,” the report said.

Aniq Zafar, the CRS CEO, said: “In the backdrop of the aforementioned eye-opening scenario, it becomes essentially vital for all the stakeholders in Pakistan to not only develop an understanding of the existing conditions involving illicit trade in cigarettes, but also take a consolidated and unanimous approach to play an effective role against this ever growing menace.”

Participants of the discussion also spoke about illegal brands being sold below the minimum applicable tax, which they said was clear evidence of tax evasion.

The average selling price of local tax evaded (LTE) brands in Pakistan is Rs27 per packet, which is far below the minimum tax per packet of Rs40. They said this price gap is fuelling the growth of LTE cigarettes in Pakistan.

According to Nielson Pakistan’s study, the exchequer suffers a loss of Rs24 billion annually due to this practice. Pakistan also ranks fourth in Asia on account of its share of illicit cigarette consumption.

Published in Dawn, May 5th, 2016