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Illegal cigarettes cause Rs40bn loss

Published Nov 25, 2012 02:52am

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It was highlighted that country needed to curb illegal manufacturing as well as smuggling of cigarettes to enhance the revenue base. — File Photo

ISLAMABAD, Nov 24: The illegal cigarette industry in Pakistan has grown to become one of the largest tax evaders in country, causing great loss to the national economy.

The local industry has suggested the Federal Board of Revenue (FBR) to change its modus operandi related and introduce reward mechanism for the officers who seize counterfeit cigarettes.

The issue was discussed at a workshop titled, ‘Identification on Counterfeit Recognition’. FBR DG (Training & Research –Inland Revenue) Ansar Javed highlighted that Pakistan ranks among the top ten countries in the world when it comes to illegal cigarette trade.

“The actual figures to the loss of national exchequer might be closer to Rs40 billion and Rs50 billion,” he said.

He further added about 18.5 per cent of cigarette industry in Pakistan comprises of either smuggled products or products on which the due levies are not paid.

The speakers said that cigarette industry was also a key source of revenue, as Federal Board of Revenue receives 39 per cent of its Federal Excise Duty (FED) and 3.5 per cent of total tax revenue from the cigarette industry.

Underlining the importance of increase in tax net, tax experts said that country’s tax to GDP ratio is merely 10.2 per cent, which is at 155th position in the world and one of the lowest in the region.

It was highlighted that country needed to curb illegal manufacturing as well as smuggling of cigarettes to enhance the revenue base.

Meanwhile, Javed acknowledged the inherent weaknesses of his organisation and conceded that FBR is still far from completely resolving this problem.

Meanwhile, FBR DG (Human Resource Management) Rana Seerat informed the ways to identify counterfeit cigarettes.

She said that the first step towards eradicating illegal cigarette trade from country was to train all concerned in this regard so the even the consumers can identify and reject counterfeit/smuggled product.

Detailed presentations made by officials of PMPKl (formerly Lakson Tobacco) who narrated the problems due to counterfeit/illegal cigarette trade.

Director Government Relations Asmer Naeem informed about the difference between counterfeit, contraband, ‘illicit white’ and look-alikes.

It was informed that around 600 billion illicit cigarettes are produced globally. 190 billion are counterfeit cigarettes with 20 per cent being produced in China.