Tax evasion in tobacco sector causes Rs310bn loss to national kitty: NUST report

Tax evasion in tobacco sector causes Rs310bn loss to national kitty: NUST report

Tax evasion in tobacco sector causes Rs310bn loss to national kitty: NUST report

Tax evasion in tobacco sector causes Rs310bn loss to national kitty: NUST report

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ISLAMABAD: Pakistan has a capacity to generate 27,000 billion rupees in terms of taxes and if Pakistan succeeded to collect half of it so it would not need any IMF programme and loans from other financial institutions.

This was stated by Defence Minister Khawaja Muhammad Asif at the launching session of the research report titled ‘Illicit Cigarette Trade in Pakistan – Current Situation and Way Forward’, produced by the National University of Science & Technology (NUST).

Khawaja Asif further said that it is absolutely saddening that counterfeit cigarette manufacturers are members of the assemblies and they watch guard their business’s interests through these assemblies.

Two major cigarette manufacturers are contributing Rs170bn in taxes while the share of all the other cigarette manufacturers is just two billion rupees, he added.

Khawaja Asif quoted ex-chairman FBR Shabbar Zaidi that during his tenure when the FBR planned to implement tax on the cigarette industry, the then Speaker National Assembly Asad Qaiser pressurized Shabar Zahide not to enforce taxes on the cigarette industry.

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NUST research report on the tobacco sector reveals that Pakistan is losing 310 billion rupees annually due to tax evasion in the tobacco sector. During the session, the audience was  briefed on the complex challenges in administration, revenue collection, policy coordination, and market dynamics of the cigarette industry which are causing significant tax revenue losses for the national exchequer.

Additionally, the inadequate enforcement of existing laws, rules, regulations, and policies has further bolstered the illicit sector.

While quoting efficacy of the Track and Trace System (TTS) under the government’s enforcement regime, the report mentioned that the TTS had been aimed at reducing the levels of illicit trade in the country.

Contrary to the goal, the illicit trade had increased since its implementation. This increase of illicit cigarette trade is feared to exceed 63% of the total market in 2024, leaving a dwindling legitimate sector share.

To counter the challenges faced by the legitimate tobacco industry, the report urged the government to come up with a well thought-out strategy including excise duty structure reforms, modified price threshold, increased enforcement of the law against sales of non-compliant brands, and extensive and consistent implementation of TTS. ‘Increased law enforcement especially in the areas like AJK could help reduce infiltration of local tax-evaded brands into Pakistan, which is the main component of the illicit cigarette trade with a share of 90%’, the report suggested.

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