An estimated Rs570 billion in tax could be collected from the cigarette industry annually, according to the Pakistan Tobacco Company (PTC) director.
During a pre-budget media briefing, PTC revealed that Pakistan’s cigarette sector is experiencing annual tax evasion of approximately Rs325billion.
Asad Shah, the PTC director of legal and external affairs, said that the illicit cigarette trade has overtaken the legal market and now accounts for up to 58 per cent of total market share.
He added that the annual production of cigarettes in Pakistan is around 82 billion sticks. Of these, taxes are only collected on 34 billion sticks, while the remaining 46 billion fall outside the tax net.
A Tier-1 legal cigarette pack retails at Rs483, of which Rs409 goes to the government in taxes. The legal cigarette sector holds only 42% of the market share but contributes 98% of the tax revenue.
Shah emphasised that the cigarette industry has the potential to contribute up to Rs570billion in tax revenues if brought fully into the formal economy.
He said that in the fiscal year 2023–24, the government collected Rs292billion from the cigarette sector. However, in the current fiscal year, only Rs223billion has been collected over the first 11 months, with an estimated Rs50billion unlikely to be collected in the final month.
Elements involved in tax evasion and certain non-governmental organisations are reportedly working with a common agenda, he claimed.
Twelve years ago, the government was collecting taxes on 67 billion cigarette sticks. Today, it collects taxes on just 34 billion.
The briefing also highlighted that the minimum legal retail price of a cigarette pack is set at Rs162.75, yet smuggled and counterfeit cigarettes are being sold in the market at prices below this threshold.
