Pakistan has experienced a surge in illegal cigarette sales due to a significant rise in federal excise duty (FED).
According to Muhammad Zeeshan, the CFO of Philip Morris Pakistan. At a meeting with journalists in Karachi, Zeeshan explained that the increased taxes on legal cigarettes had widened the gap between legal and illicit cigarette sales.
He said that as taxes on legal cigarettes increase, so do the sales of illegal ones. Pakistan now ranks second in Asia for illicit cigarette sales, only behind Malaysia. Zeeshan emphasized that without addressing the illegal cigarette trade, raising FED will be ineffective, as the legal industry shoulders the entire tax burden.
He called on the government to enforce laws uniformly across the industry, implement track-and-trace systems for all companies, and foster a business environment that supports organized, tax-paying industries.
Zeeshan also noted that the rising excise duty is negatively impacting the legal cigarette sector, ultimately reducing the government’s tax revenue from cigarettes. The first quarter saw a 50% decline in legal cigarette sales, while the price difference between legal and illegal cigarettes has doubled due to the excise duty increase.
The surge in illicit sales could prevent the government from reaching its Rs260 billion tobacco industry tax collection target, potentially resulting in a mere Rs170 billion collection
