ISLAMABAD: The cigarette sale in the country faced huge decline due to increasing illicit trade during the fiscal year 2015-16.
The overall volumes and sales data of two cigarette manufacturing companies – PMI, PTC – show massive decline. The companies have also raised the issue with Federal Board of Revenue (FBR).
A leading research company KPMG has revealed that the total taxes on the weighted average price cigarette increased between 2011 and December 2015 by Rs 15 in real terms (i.e. inflation adjusted) per pack of 20 cigarettes. Over the same period, the pre tax price of cigarettes (i.e. the price excluding all duties and sales tax) increased by a smaller amount, by Rs.10 per pack of 20 cigarettes in real terms.
As a result, the average pack price increased from Rs 43 to Rs 68, in real terms, with taxes responsible for 62% of the retail price increase. Over the same period, the average household’s income fell by 1%, in real terms. The combination of a decline in household income and rising duty paid cigarette prices made cigarettes 59% more expensive, relative to incomes, for consumers in December 2015 compared to 2011. The increase in the price of duty paid cigarettes contributed to a widening price differential between VFM segment duty paid and illicit cigarettes from Rs 11 to Rs 28 per pack between the 2010-11 and 2015-16 fiscal periods.
It said that between 2011 and 2015, duty paid cigarette sales volumes fell by 6% as duty paid cigarettes became less affordable for consumers.
