The Federal Board of Revenue (FBR) has failed to register cigarette brands, enabling more than 150 unregistered brands to operate on the open market.
According to the information, the Federal Government passed brand licensing legislation in 2021 that requires cigarette makers to register their brand before selling it on the market.
The legislation was enacted to prevent unauthorized brands from entering the market. However, the law’s enforcement is lacking, and more than 150 unregistered brands belonging to local tobacco makers are still being sold openly on the market. According to a spokesman from the Pakistan Tobacco Company (PTC), just 16 cigarette brands have filed for registration so far.
Furthermore, industry officials said that they had urged FBR to raise the advance tax on green leaf threshing processing (GLTP) units in the next fiscal year’s budget (2022-2023).
“The advance withholding tax (AWT) was increased from Rs. 10 per kg to Rs. 300 per kg by the PTI regime in 2018 through the supplementary budget, but the decision was reversed in budget 2019-20 after lobbying by local influential tobacco players, citing the reason that this tax was imposed on tobacco farmers,” he added.
The international tobacco firms, on the other hand, argue that this withholding tax was set at a variable rate and was imposed on manufacturers rather than farmers.
Currently, 11 GLTP units can be found in various regions of Khyber Pakhtunkhwa, and the implementation of Rs. 300 per kilogram AWT might make illegal trade unviable, according to a PTC spokesperson.
We can affirm that if the government imposes an Rs. 300 per kg advance tax on GLTP units in the 2019 budget, the percentage of illegal cigarettes would plummet from 40%, equal to Rs. 70 billion, to barely 20% in no time.
He also revealed that more than 200 local illegal cigarette brands sold for between Rs. 20 and Rs. 40, although the authorized minimum price was Rs. 62.76, including a Rs. 42.12 minimum tax per pack.
He further said that during the current fiscal year 2021-22, PTC would pay over Rs. 150 billion in taxes to the national exchequer, whilst the local industry will not pay any.