ISLAMABAD: As the controversy regarding the introduction of the third tier of taxes for the tobacco industry continues, multinational companies claim they pay almost all of the taxes collected from the cigarette industry.

The Pakistan Tobacco Company (PTC) and Philip Morris Pakistan, the only two multinational cigarette manufacturers in the country, contribute 98pc of the government’s revenue from the tobacco industry.

“We have about 65pc of the total cigarette market in Pakistan but we contribute 98pc to the [tax] revenue from this industry,” PTC Senior Corporate Affairs Management Noor Aftab told media persons.

He added that all the others together contribute to 2pc of tax revenue and stressed that the existing third tier should not be abolished as it has a positive impact on the legal tobacco industry.

While the government is considering increasing the federal excise duty on cigarettes, local manufacturers are demanding the third tier should be abolished altogether.

During the last six years, the overall consumption of tobacco has seen a slow decline at 0.4pc per annum. From 81.7 billion sticks in 2012 to 79.8 billion in 2018.

“The continuity of this system will lead to a gradual increase in tax collection over the years,” said Mohammad Waqas Bhatti, head of Corporate Finance.

PTC officials said a dedicated task force was created by the Federal Board of Revenue- the Inland Revenue Enforcement Network- was also created which led to the confiscation of more than 1.6 billion cigarettes on which taxes were being evaded and raw materials in numerous raids against illicit operations in 2017.

Due to these measures, the overall illicit cigarette trade in Pakistan has declined by about 8pc in 12 months from 41.2pc in 2016-17 to 33.3pc in 2017-18, they said.

Published in Dawn, September 14th, 2018