ISLAMABAD, May 31: The continued availability of no-duty paid cigarettes in the market is causing Rs7 billion loss to the national exchequer annually. Informed sources said here on Tuesday that the illegal cigarette manufacturers were operating in NWFP, Azad Kashmir, Chakwal, Bahawalpur and other parts of Punjab allegedly with the help of local administrations and the tax department concerned.

According to an official data, a total of 72 billion cigarette sticks were manufactured in 2004, which included 56 billion sticks by the legitimate sector and 16 by illegitimate sector. Two major cigarette manufacturing companies paid Rs27 billion in taxes on less than 20 brands while on the other hand all other companies only paid Rs20 million in tax on as many as 120 cigarettes brands.

The government officials concerned admit that evaders were harvesting bumper returns by commercially impairing the genuine manufacturers and undermining government’s revenue generating capabilities. A total minimum cost for making and selling a cigarette pack of 20’s including trade and manufacturers’ margin is Rs10.30 which includes raw material cost, packaging cost, excise duty, sales tax and other expenses like marketing and freight.

Ironically, while the minimum cost of cigarette pack is Rs10, more than 100 brands were being sold up to Rs6 per pack. “The mushroom growth of illegal cigarette manufacturers is a matter of concern and it is surely causing loss to the national exchequer,” said an official of the Central Board of Revenue (CBR).

He regretted that some people in the department were conniving with the manufacturers of substandard cigarettes and that they needed to be taken to task. “But this requires strong action from the top,” he said. He regretted that some legislators especially from NWFP were also behind the tax evaders. Major contributors to central excise duty are cigarette (35 pc) cement (21 pc) POL products (11 pc) natural gas (10pc), beverages (6pc) and others (18pc).

It is said that the continued availability of no-duty paid products restricts the ability to effect legitimate price increases and is detrimental to the principle of level-playing field. The absence of level-playing field makes it extremely difficult for the legitimate sector to market their brands against the duty evaded products.

Sources said that aggressive enforcement of laws required, and raids should be conducted on illegal operations with arrest and stern punishment to defaulters. “We need stringent laws to make evasion a serious offence,” said a source.