PESHAWAR: The local cigarette manufacturing companies in Khyber Pakhtunkhwa and Azad Jammu Kashmir, taking the advantage of weak law enforcement policies, are violating tax laws.
According to a market survey, several local brands are growing as they are being sold at a retail price lower than the legal minimum price of Rs42/- per 20-cigarette pack fixed by the government. These companies print prices on cigarette packs and in newspaper advertisement as per the official rate but are sold for different prices in the market.
Euro-monitor International, a leading business intelligence company, in 2012 report also revealed that these local brands evading taxes by selling below the legal minimum price.
A local manufacturers recently advertised prices for their brands, “Gold Street International” and “Olympic” to be Rs46, and “Hero” and “Kisan” to be Rs43, but the market survey unearthed that at the retail level these brands were available at a lower price than the advertised prices, which was Rs35, Rs25, Rs30 and Rs20 respectively.
The prices of other brands by various local companies including Gold Cup (Rs33), Melburn (Rs35), Press (Rs35) and Cricket (Rs15) were also checked during the survey and it was found that all the prices were below the legal minimum price.
The excise tax per 1000 sticks in this value category is Rs1085, which translates into Rs217 excise tax per pack. After adding the sales tax, the minimum tax per pack is Rs27.95. If the pack is selling for Rs15 and Rs20 prices, clearly the price is below the amount of tax required to pay per pack of 20 cigarettes. This shows that the local manufacturers are not paying any taxes.
The Oxford Economics, a leading global forecasting and quantitative analysis company, estimates that due to illicit tobacco trade, Pakistan loses tax revenues of over Rs27 billion per year.
The Euro-monitor also reports the tax losses due to these local brands to be about 17% of Pakistan’s total current account deficit FY 2014. These local brands also undermine the government’s health initiatives as they sell below minimum legal price making it easier for our youth to buy cheaper cigarettes.
