Tag: Pakistan

  • 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.

  • Growers Reject Official Tobacco Price

    Growers Reject Official Tobacco Price

    Photo: Taco Tuinstra

    Tobacco grower representatives in Khyber Pakhtunkhwa province accused Pakistan’s federal government of violating the tobacco law by fixing the leaf price for the current crop below the previous year’s rate, reports Dawn.

    Martial Law Order 487 requires the weighted average price for the tobacco crop of any year to be equal to or higher than the weighted average price paid to them for the crop of the immediately preceding year.

    According to the grower representatives, the Federal Ministry of National Food Security and Research has set the minimum indicative price at PKR505 ($1.81) per kilogram for flue-cured Viriginia tobacco this year. Last year, the weighted average price was PKR709 per kilogram.

    The growers said the move was a flagrant violation of the tobacco marketing law that should be immediately corrected.

  • Prices Slow Tobacco Consumption: Study

    Prices Slow Tobacco Consumption: Study

    Photo: Taco Tuinstra

    Cigarette sales in Pakistan dropped 18 percent following a price hike, reports The Nation citing a recent survey from Islamabad’s Centre for Research and Dialogue (CRD).  

    Pakistan’s total consumption, which includes taxed, smuggled and untaxed products, ranges from 72 billion sticks to 80 billion sticks annually.

    “Pakistan has a long way to go in tobacco taxation,” said Maryam Gul Tahir, director of the CRD, noting that Pakistan has some of the world’s cheapest cigarettes. “Public health must be prioritized over industry interests.”

    The World Bank recommends a uniform tax structure for all tobacco products to reduce consumption further and increase government revenue.

  • Illicit Market Smaller Than Suggested: WHO

    Illicit Market Smaller Than Suggested: WHO

    Photo: Taco Tuinstra

    Pakistan’s illicit cigarette market is smaller than the tobacco industry claims, according to the World Health Organization.

    Nonetheless, the illegal sales still account for 23.1 percent of the country’s total cigarette trade, a survey by the global health body found.

    Of the illicit cigarettes, 47 percent is smuggled, 45 percent is nontax paid and 8 percent is counterfeit.

    According to the study, which is based on Pakistan Bureau of Statistics data, tax evasion on domestically produced cigarettes in 2015-2016 amounted to PKR53.8 billion ($193.16 million). Seventy percent of that share was evaded by the legitimate sector, the WHO study said.

    Anti-tobacco activists have been pressing the government to raise tobacco taxes to 70 percent of the retail price, in line with WHO guidelines

    “With over 60 percent of the population comprising youth, it’s crucial for the government to protect them from the ills of tobacco use,” said Malik Imran Ahmed, country head of the Campaign for Tobacco-Free Kids (CTFK), told Business Recorder.

    He said the move would generate PKR200 billion in additional revenue by year-end, and help recoup healthcare costs associated with smoking-related illnesses.

  • Pakistan Urged to Raise Tobacco Taxes

    Pakistan Urged to Raise Tobacco Taxes

    Image: alexlmx

    Health activists want Pakistan to increase its Federal Excise Duty (FED) on cigarettes to 70 percent of retail prices, in line with international standards, reports Dawn. Achieving that level requires a rate hike of 37 percent.

    According to proponents of the measure, raising taxes would not only reduce the burden on Pakistan’s healthcare system, but also earn the government much-needed revenue. They calculate that a 37 percent FED hike would generate an additional PKR60 billion ($215.7 million) from cigarettes for 2023-2024. Revenue collections from July 2023 to January 2024 reached PKR122 billion, with full year estimates exceeding PKR200 billion.

    Backers of the increase reject tobacco industry arguments that tobacco tax hikes fuel illicit trade, suggesting that tobacco firms manipulate their reported production to influence tax policy.

    According to activists, some 31.6 million adults currently use tobacco in Pakistan, resulting in more than 160,000 deaths every year, while smoking-related illnesses and deaths cost the country at least 1.4 percent of its GDP annually.

    Antismoking groups are also urging the government to embed healthcare cost-recovery in tobacco tax policy through automatic adjustments to excise taxes, ensuring that they cover a certain percentage of the total health costs attributable to smoking.

  • Illicits to Surpass Half of Pakistan’s Market

    Illicits to Surpass Half of Pakistan’s Market

    Photo: Taco Tuinstra

    The share of illicit products on Pakistan’s tobacco market is expected to reach 56 percent by the end of 2024, reports Ary News.

    According to a recent Ipsos survey, more than 165 brands of cigarettes are being sold in the country without tax stamps, depriving the government of PKR 300 billion in annual tax revenue.

    In addition, 104 cigarette brands are being sold below the minimum price.

    The shift toward duty-free and smuggled cigarette brands is facilitated by the availability of larger pack sizes and exacerbates the issue of tax evasion, according to the publication.

    Stakeholders have been calling for stricter enforcement of existing regulations, enhanced enforcement and new tax policies.

  • Khyber Pakhtunkhwa Mulls Steep Tax Hike

    Khyber Pakhtunkhwa Mulls Steep Tax Hike

    Photo: Taco Tuinstra

    Pakistan’s Khyber Pakhtunkhwa government is mulling an increase in the local tobacco tax (cess) by 400 percent, reports Pakistan Today. The increase is expected to generate revenue of more than PKR2 billion ($7.2 million) annually.

    A meeting between Muzammil Aslam, advisor to the chief minister of finance; Aqibullah Khan, provincial minister for irrigation; Akmal Khatak, director general of excise; and a representative delegation of tobacco growers approved a proposal to increase the tobacco development cess by PKR50 per kilogram for Viginia tobacco, PKR30 per kilogram for white leaf rustica tobacco and PKR20 per kilogram for niswar tobacco.

    The tobacco development cess is not equal to the actual price of tobacco, the meeting was informed. Various proposals are under consideration to increase the cess. An action plan for exports is being prepared to increase income from tobacco exports, according to Aslam.

    The provincial government currently earns PKR500 million annually from tobacco 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.

  • PMI Urges Action Against Illicit Trade

    PMI Urges Action Against Illicit Trade

    Photo: alexlmx

    Philip Morris Pakistan Limited (PMPKL) has urged action against the growing presence of tax-avoiding products on the country’s tobacco market, reports  The Express Tribune

    In a media briefing, PMPKL Head of Communications Andleeb Uroos Ahmed said the company’s income had plunged by 86 percent in 2023. He attributed the decline to last year’s hike in Federal Excise Duty (FED), which doubled cigarette prices, and the subsequent escalation in market share of illicit products.

    This condition has provided an ample opportunity for numerous local illicit cigarette manufacturers, notably in Khyber Pakhtunkhwa and Azad Jammu & Kashmir, to amass substantial market share while contributing minimally to national revenue, according to critics of the tax hike.

    Illicit cigarettes now command a 63 percent market share, causing the exchequer to miss out on  PKR310 billion ($1.11 billion) in tax collections annually.

    While acknowledging government efforts such as the introduction of tax stamps, Ahmed expressed concern about lax enforcement.

    Stressing the interests of tax-paying companies and government’s need for sustainable revenue, she suggested including tax-evading cigarette manufacturers in the tax net instead of burdening the legitimate industry with additional taxes.

    By curtailing tax evasion, she calculated, the Federal Board of Revenue (FBR) can potentially boost revenue collection from the tobacco sector by more than $2 billion.

    “The potential revenue, if realized, could significantly contribute to human development projects and public health initiatives in Pakistan, addressing critical areas where the country lags in human development rankings,” she added.

    She said that anti-tobacco organizations have been misguiding the government by spreading misinformation about the revenue collection potential from the legitimate tobacco industry.

  • Pakistan Tobacco Firm Protests ‘Illegal’ Raid

    Pakistan Tobacco Firm Protests ‘Illegal’ Raid

    Photo: sezerozger

    Pakistan’s Walton Tobacco Co. has called on the Azad Jammu and Kashmir government to reopen the company’s offices, alleging that the company has been illegally sealed before Eid-ul-Fiter, the Muslims’ largest religious festival, reports Business Recorder. The closure has resulted in sudden unemployment for more than 400 employees.

    “We urge the authorities to immediately open the company and restore livelihoods of hundreds of workers,” said Arif Zia, spokesperson for the Walton Tobacco Co.

    “We are doing business and paying taxes for the last 18 years,” said Zia, adding that the company is the highest taxpayer in Kashmir. The company stated that it had been illegally raided, products had been seized, and they were threatened with serious consequences by the authorities.

    According to the manufacturer, authorities in Azad Jammu and Kashmir did not issue any “show cause” notices to the company or conduct income tax audits before suddenly sealing all the offices.

    “We will be forced to relocate businesses elsewhere if this trend continues,” the tobacco company said, noting that the government is conducting enforcement action as a show and that law enforcement has not taken any action against illegal cigarette sales.

    Law enforcement seized the company’s trucks during transportation rather than at excise check posts; the company is allegedly missing 200 trucks.