Tag: Pakistan Tobacco Company

  • BAT Threatens to Pull Out of Pakistan

    BAT Threatens to Pull Out of Pakistan

    Photo: Rawf8

    British American Tobacco may pull out of Pakistan if the government further increases cigarette taxes, a company representative warned during meetings with Prime Minister Shehbaz Sharif and the Special Investment Facilitation Council national coordinator General Sarfraz Hussain.

    According to BAT, existing taxation has already caused its sales in Pakistan to slump by 38 percent and increased the size of the illicit market to 58 percent of nationwide cigarette sales. In the previous budget, the government significantly increased taxes on tobacco, which instead of curbing smoking resulted in shifting smokers from tax-paid expensive brands to cheaper illicit brands, the company noted.

    “The past couple of years’ developments on fiscal policies have raised questions about the sustainability of the company’s operations in Pakistan,” Michael Dijanosic, BAT’s regional director for Asia Pacific, Middle East and Africa, was quoted as saying by The Express Tribune.

    If there is a repeat of last year’s tax increase, there is no reason the company should not exit Pakistan, he said.

    The past couple of years’ developments on fiscal policies have raised questions about the sustainability of the company’s operations in Pakistan.

    Michael Dijanosic, regional director for Asia Pacific, Middle East and Africa, BAT

    The regional director said that the federal excise duty increased by 73 percent in real terms, making it unviable to do business. He also said that despite a 73 percent inflation-adjusted increase in taxes, the government’s revenues grew only 8 percent in real terms due to the slump in sales.

    Any further increase in federal excise duty rates in the budget would bring the company’s factories to a standstill, the BAT official warned.

    According to Dijanosic, the formal tobacco sector paid nearly PKR700 billion ($2.51 billion) in taxes to the government during the past five years. PTC has also invested in a global business center in Lahore and plans to expand operations if the government reviews its taxation policies.

    PTC has been exporting cigarettes to numerous markets since 2019 and has so far earned $156 million for the country. For the next fiscal year, the company is targeting $60 million in exports, but one-third of the order is at stake due to the Ministry of Health’s reluctance to amend the Statutory Regulatory Order, which prohibits the sale of cigarettes in packs of 10 sticks, for export orders.

    In March, the prime minister awarded the second-highest taxpayer award to PTC in all categories of taxes.

  • Pakistan Advised to Reject 10-Stick Packs

    Pakistan Advised to Reject 10-Stick Packs

    Photo: Taco Tuinstra

    Health advocates are urging the government of Pakistan to reject an application by Pakistan Tobacco Co. (PTC) for permission to pack cigarettes in cartons of 10 sticks, reports The Nation.

    According to Malik Imran Ahmed, country head of the Campaign for Tobacco-Free Kids, 10-stick packs would undermine efforts to discourage smoking among young people and other at-risk demographics.

    To deter consumption by minors and other at-risk groups, Pakistan law requires tobacco companies to sell cigarettes in packs of at least 20 cigarettes. Sales of individual sticks are permitted, however.

    The rule is placing at risk a large order for PTC to deliver $20.5 million worth of cigarettes to Sudan by mid-May. The contract requires PTC to supply the cigarettes in packs of 10 sticks each. Sudan does not have minimum stick laws, according to PTC officials.

    PTC has requested the government to amend the rules and limit the 10-pack selling restriction to domestic consumption, according to Tribune.

    The Ministry of Health has referred the matter to the Ministry of Foreign Affairs to seek its input on the matter in light of the World Health Organization Framework Convention on Tobacco Control.

    In 2019, PTC also lost an export order due to a lack of clarity on 10-pack cigarette manufacturing. At that time, the Ministry of Commerce gave the go-ahead for exports, but the Ministry of Health objected.

    PTC has been exporting cigarettes since 2019 and has earned $156 million from that business to date. In 2023, the company paid PKR148 billion ($531.35 million) in taxes, making it the country’s second-largest taxpayer after Pakistan State Oil.

  • PTC Disputes Tax Underpayment Charge

    PTC Disputes Tax Underpayment Charge

    Image: alexlmx

    Pakistan Tobacco Co. (PTC) is disputing allegations that legitimate tobacco companies are shortchanging the country’s tax collector, reports the Associated Press of Pakistan.

    Earlier this year, an Islamabad-based think tank presented figures showing that Pakistan’s national exchequer collected PKR567 billion ($20.4 billion) less from the tobacco industry than it was entitled to.

    “It is important to note that this figure is incorrect, misleading and detached from ground realities,” PTC wrote in a press release. “The only loss incurred to the government of Pakistan by the tobacco industry is because of tax evasion of illicit manufacturers as the legitimate industry pays all applicable duties and taxes.”

    Contrary to the report’s suggestion, the legitimate tobacco industry has significantly contributed to the national exchequer, paying PKR148 billion in fiscal year 2021-2022 and PKR173 billion in 2022-2023, according to PTC.

    The company highlighted that the government recently recognized PTC as one of Pakistan’s top tax-paying entities. It emphasized importance of a level playing field for the legitimate sector, which is currently undermined by the illicit sector.

  • Track-and-Trace Honored in the Breach

    Track-and-Trace Honored in the Breach

    Image: alien185

    Only two out of the more than 40 cigarette manufacturers in Pakistan have properly implemented the country’s track-and-trace system, according to British American Tobacco, reports The Nation.

    Speaking during a media briefing organized by the Pakistan Tobacco Company (PTC) in Islamabad, BAT’s area head of legal and external affairs for the Asia Pacific, Middle East and Africa regions, Mona Iskandarani, stressed the importance of timely implementation and enforcement of the track-and-trace system.

    “We acknowledge the recent enforcement initiatives undertaken by the Federal Board of Revenue in Pakistan but we need sustained enforcement efforts across the supply chain to curb the menace of illicit cigarette trade in Pakistan,” said Iskandarani.

    PTC’s legal and external affairs director, Asad Shah, pointed out that while track-and-trace systems have been implemented in various countries, the system does not offer a silver bullet. Rather, it serves as a tool to facilitate law enforcement agencies to carry out raids and seizures of tax evaded products, he said.

    Despite a lapse of 15 months since the implementation deadline, only two out of over 40 cigarette manufacturers have implemented the track-and-trace in true letter and spirit, Shah lamented. Instead of declining, tax evasion has grown in the tobacco sector since the system became mandatory, he said.

    The share of illicit cigarette sales is projected to grow from 37 percent of the market in fiscal 2021-2022 to approximately 63 percent by the end of fiscal 2023-2024, potentially causing the government lose PKR310 billion ($1.08 billion) in tax revenues in fiscal 2023-2024.

  • Pakistan Tobacco Growers Reject Price

    Pakistan Tobacco Growers Reject Price

    Image: Tobacco Reporter archive

    Tobacco growers in Pakistan have rejected the per kilogram price set by Pakistan Tobacco Company and Philip Morris International Pakistan, reports Dawn.

    The companies offered PKR425 ($1.48) per kilogram for Virginia tobacco, according to Arif Khan, central president of Ittehad Kashtkaran, Khyber Pakhtunkhwa. Khan said this is unrealistic due to the rising prices of fertilizer, labor, pesticides and other costs.

    The Economic Coordination Council of Federal Ministry for Commerce set the minimum price at PKR310 per kilogram.

    “In the open market, businessmen and small companies are purchasing tobacco at PKR500 per kilogram, offering PKR76 more than the multinational companies,” said Khan, who also noted that if the companies did not increase prices, the growers would be forced to stage protest in front of the local offices.

    “After Eid, we will evolve a joint line of action,” said Liaqat Yousafzai, central president of the Tobacco Growers Association Pakistan, who also said they appealed to growers to stop taking produce to the companies’ buying centers.

  • Pakistan Tobacco Trims Output as Illicit Trade Booms After Tax Hike

    Pakistan Tobacco Trims Output as Illicit Trade Booms After Tax Hike

    Photo: Taco Tuinstra

    Pakistan Tobacco Co. (PTC) is scaling back production as it struggles to compete with illicit tobacco sales, report Pakistan Today and The Express Tribune.

    In a letter to the Federal Board of Revenue, the company stated its intention to re-export four cigarette making machines due to a decline in sales volume. The company has reportedly already shut down eight of 10 production lines at its Jhelum facility.

    The move comes in the wake of a steep tobacco tax hike. In February, Pakistan increased the federal excise duty by more than 200 percent, driving smokers to cheaper untaxed locally manufactured tobacco products and smuggled cigarettes. In March, production of duty-paid tobacco products plunged 50 percent, according to the Pakistan Bureau of Statistics. The overall large-scale industry, by contrast, suffered only a decline of 25 percent in the production of duty-paid products.

    According to PTC representatives, volumes of duty-not-paid cigarettes and smuggled cigarettes have shot up 32.5 percent and 67 percent, respectively since January.  This has bumped the illicit sector’s share to more than 42.5 percent of Pakistan’s total tobacco market.

    In 2022-2023, the share of legitimate tobacco sector was 41.4 billion sticks while the illicit sector sold 41.6 billion sticks. Observers expect the February tax hike to hand an additional 11.8 billion sticks to the black market in 2023-2024.

    PTC Senior Business Development Manager Qasim Tariq said that, as a result of the tax hike, the government would for the first time in Pakistan’s history lose more tax income to the illicit sector than it earned in revenue from legitimate companies.

    “If the current fiscal regime prevails, damage to the national exchequer as well as the legitimate industry will be immense and tough decisions will have to be taken,” he cautioned.

    A track-and-trace system to help combat illegal tobacco sales has been delayed by legal challenges and other setbacks.

  • 2013 Pakistan Tobacco profits 202 percent higher than 2012

    The Pakistan Tobacco Company has announced its results for the quarter ended March 31, 2013, recording stellar earnings of Rs1.09 billion as compared to only Rs359 million earned in the same period of the preceding year (translating into 202 percent growth). The company has also announced an interim dividend of Rs2 per share alongside the results, according to a story in the The International Herald Tribune.

    The company’s net sales for the period improved nearly 28 percent over the same period of the previous year, and it recorded a 45 percent higher gross profit at Rs2.72 billion. Meanwhile, its selling and distribution expenses dropped 33 percent over the previous year to Rs597.49 million, while administrative expenses remained more or less flattish at Rs331.72 million. At the same time, its operating expenses grew 17 percent to Rs136.53 million, while operating income also registered a rise of 144 percent to Rs20.99 million. All these factors meant the company retained more of its gross profits than the previous year, as its net finance costs also registered a drop of an impressive 96 percent to Rs1.66 million.

    The company paid a total of Rs15.26 billion in excise, sales and income taxes for the period.