TobaccoReporter logo

Tag: Pakistan

  • Tobacco Farmers Urge End to Pakistan’s Advance Tax

    Tobacco Farmers Urge End to Pakistan’s Advance Tax

    Photo: Taco Tuinstra

    Tobacco farmers in Pakistan on Monday urged the government to withdraw PKR380 ($1.76) per kilogram advance tax on the tobacco leaf, otherwise they would stage a protest in Islamabad.

    Addressing a press conference at Islamabad National Press Club, president of the Mehnatkash Labour Federation, Ibrar Ullah, said that price of tobacco per kilogram in the open market was PKR256 per kilogram while the advance tax on it was PKR380 per kilogram, according to The News.

    He said the advance tax on the tobacco leaf was hurting the sale of the crop in the market and this would render over 15,000 labourers and 20,000 families of the farmers jobless.

    The president of the Kissan Board, Rizwan Ullah, also rejected the imposition of the advance tax on the crop, saying the government was destroying the value of the crop through such tactics instead of providing them relief.

    He said that all farmers from Khyber-Pakhtunkhwa province would stage a sit-in in Islamabad if the advance tax on the crop was not withdrawn.

    Liaqat Yousafzai of the Kashtkar Coordination Council KP termed the imposition of the advance tax on the tobacco crop as “public enmity.”

    He said that rates of tobacco were increasing around the world, while they were decreasing in Pakistan.

  • Firms Shun Track-And-Trace System

    Firms Shun Track-And-Trace System

    Photo: Maksym

    More tobacco companies must install Pakistan’s new track-and-trace system to tackle the country’s massive tax evasion problem, according to Project Director Tariq Hussain Shaikh.

    Out of the 40-plus companies registered with the Pakistan Tobacco Board, only three—Philip Morris Pakistan, Pakistan Tobacco Co. and Khyber Tobacco—have installed the track-and-trace system that became operational on July 1, reports the Business Recorder.

    According to Shaikh, the system has significantly boosted government tax collections in other sectors. In the sugar industry, for example, sales tax collections increased by 34 percent after its implementation at the end of 2021.

    Success, however, depends on across-the-board implementation, Shaikh cautioned. Unless more tobacco companies adopt it, the track-and-trace system will not reduce tax evasion, which in Pakistan amounts to PKR80 billion ($335.74 million) per year.

    In a letter dated June 30, 2022, Pakistan’s Federal Board of Revenue directed all cigarette manufacturers to apply tax stamps to their products from July 1, 2022. Nine tobacco companies have challenged the directive on technical grounds.

  • Pakistan Mandates Tobacco Track-and-Trace System

    Pakistan Mandates Tobacco Track-and-Trace System

    Photo: Taco Tuinstra

    Several tobacco companies are challenging Pakistan’s Federal Board of Revenue (FBR) in court, seeking relief from the country’s new track-and-trace system, according to reports in The International News and Dawn.

    Starting this month, all tobacco companies operating in Pakistan must implement the country’s track-and-trace system. Tobacco products may enter the domestic market only if they carry stamps and unique identification markers.

    To date, only three tobacco manufacturers—Pakistan Tobacco Co., Philip Morris International and Khyber Tobacco Co. (KTC)—have installed the track-and-trace system and made it operational. KTC Chief Technology Officer Shahid Sattar said the system would help the company enhance its presence in the Pakistani market and improve the quality of its products to international standards.

    The companies challenging the FBR want to continue selling old stock. The agency instructed them to discontinue such sales on June 30.

    The tobacco companies that are already operating the system maintain that it will succeed only if all players implement it. According to critics, the companies challenging the FBR instructions engage in illicit trade and fear the track-and-trace system will expose their illegal activities.

    In addition to the multinationals, there are at least 21 tobacco companies operating in Pakistan, including 18 in Khyber Pakhtunkhwa and three in the country’s federally and provincially administrated tribal areas.

    Out of the PKR134 billion ($645.47 million) in taxes collected from the tobacco industry in 2020, PKR131 was paid by two companies, which together held a 65 percent market share.

  • Pakistan: Illicit Cigarette Market Up Significantly

    Pakistan: Illicit Cigarette Market Up Significantly

    Photo: Taco Tuinstra

    Pakistan’s revenue losses from the illicit cigarette trade increased by 53 percent in two years, reports The Nation, citing a report by Oxford Economics. In fiscal year 2020-2021, the state missed PKR77.8 billion ($380.7 million) in tax collections due to illicit cigarette sales, compared with PKR50.9 billion in 2018-2019.

    Oxford Economics said that illegal cigarettes account for 38 percent of total consumption in Pakistan, compared with 32 percent in 2018-2019. The vast majority of illegal cigarettes (90 percent) are locally produced.

    The value of tax evaded by illegal cigarettes in Pakistan in 2021 amounts to 58 percent of the total tax revenues collected from legitimate sales in the previous financial year. To place this in context, it is equivalent to more than double the government’s education expenditure in 2020-21.

    According to Oxford Economics, the rise in the illicit cigarette market share in recent years coincided with a sharp rise in the excise rates. Excise rates on most legal cigarettes nearly doubled following the September 2018 supplementary budget and the June 2019 Federal Budget. Tier 2 excise rates—which represent 92 percent of the total industry volume—rose from PKR854 per 1,000 pieces to PKR1,650 per 1,000 pieces.

    Due to the instability of revenues and growing illicit share, Pakistan kept cigarette excise taxes unchanged in 2020-2021.