ISLAMABAD, June 6: The government will introduce strict budgetary measures to curb the persistent tax evasion by the tobacco industry, causing an annual loss of around Rs6 billion to the national exchequer, an official told Dawn on Friday.

The official blamed smuggling of foreign brands of cigarettes from neighbouring countries as being the major factor for the loss in this regard.

According to official statistics, during the first eight months of the current financial year, tax collection from the cigarette industry showed an increase of five per cent against figures for the corresponding period of last year.

The official attributed the increased collection in this regard to a combination of price and duty increase in the current fiscal.

In a related development, managing director of the Pakistan Tobacco Company (PTC) Jeremy Pike urged the government to check duty evasion and curb the incidence of smuggling, saying it was vital to resolve problems being faced by the tobacco industry.

He said this while speaking at a meeting of the Islamabad Stock Exchange’s board of directors here on Friday.

Mr Pike had been invited by the ISE’s board as part of its programme to promote greater interaction between investors and companies.

Figures provided to Dawn showed that the total cigarette market stood at 66 billion sticks during 2002-03, of which legitimate sales amounted to around 50 billion sticks.

The total revenue, deposited with the government, stood at around Rs 21.1 billion.

Criticizing the absence of a level playing field in the tobacco industry, Mr Pike said that uneven business environment, evasion had risen to 21 per cent of the total market share, adding that the phenomenon showed a rising trend every time there was an increase in price/duty ratio.

Blaming the 9/11 incident for the increased availability of the smuggled brands in the country, he said smuggling had a two per cent of market share.

Counterfeiting, he said, was also damaging the brand goodwill, annoying customers and ultimately leading to the loss of sales volume.

Mr Jeremy cautioned against the increasing tendency to counterfeit cigarette brands, saying that it led to low cigarette prices, prevented regular price hikes, encouraged down-trading and could lead to adverse excise structure changes, adding that Pakistan had one of the lowest cigarette prices in the world.

Referring to the PTC’s financial performance, he said the company’s volume in 2002 stood at Rs24.364 billion, while its operating profit had settled at Rs 952 million during the same period. The company’s after-tax profit for 2002 was Rs420 million.

He said that the company’s right shares issue was worth $40 millions in 2000 while it had posted profit in 2001 after sustaining losses for six years.

For the first time in eight years, he said, the PTC shareholders had been paid a dividend valued at Rs204 million.