ISLAMABAD: Express­ing serious concerns over the mini-budget, Pakistan Tobacco Company (PTC) has told the finance ministry that new taxes on cigarettes have enhanced smuggling and counterfeit products in markets.

Talking to media on Friday, Syed Asad Shah, PTC’s Legal and External Affairs director said the massive increase in the federal excise duty (FED) and the minimum price set by the FBR will lead to reduction in the revenue collection of the government from this sector within two years.

He said a letter had been written to the finance ministry, informing it that smuggled and counterfeit locally-made cigarettes had started entering the markets, even in big cities since the announcement of new prices of cigarettes. He showed several illicit cigarette packs available in the markets that included smuggled brands without any health warning, counterfeit products of local brands and non-registered and non-tax paid locally-produced cigarettes.

Mr Shah said those involved in the illegal cigarette trade were prepared to hit the markets at all the price range of cigarettes.

“Currently the share of illicit cigarettes in Pakistan was 35 per cent but this share will go up to 40 and 50 per cent this year,” he said adding, “if the government did not rationalise its policies of managing threshold price level and contain illicit trade its revenue will decline after two years,” he claimed.

The illicit cigarettes are sold below the minimum price because the applicable tax per packet of cigarettes is not paid at these products.

The total taxes paid by the cigarette sector in 2021-22 was Rs150 billion and expected collections this year will be around Rs185 billion, after the new taxation and the contribution from the two multinational companies, the PTC and the Philip Moris, will be around Rs182 billion.

Mr Shah said there were around 35 cigarette companies which made some 200 brands, but the local players paid only Rs3 billion in taxes and duties to the government.

Published in Dawn, February 25th, 2023