Sales of illicit cigarettes have gone up “massively” after multiple increases in the federal excise duty (FED) in recent months, said Philip Morris Pakistan Ltd chief financial officer Muhammad Zeeshan.
Talking to a group of journalists, the representative of one of the two largest cigarette sellers in Pakistan said the illegal trade of sticks was hurting the documented sector and denting the government’s tax revenue.
“Whenever the tax on legal cigarettes increases, the sale of illegal cigarettes also rises,” he said.
The government has increased the FED three times in the current fiscal year. It increased by 25 per cent in June and August and by 150pc in February. With the latest increase, the excise duty on cigarettes has gone up to 200pc.
According to Mr Zeeshan, the impact of the FED increase is setting in on the legal cigarette industry. Numbers for the January-March quarter show the sale of legal cigarettes went down by approxiamtely 50pc as the increase in the excise duty has benefitted the undocumented segment of the tobacco sector.
The market share of illegal cigarettes was between 35pc and 38pc before the excise rate hike. It went upto 45pc within one month, he said. “If the government does not take appropriate measures, the share of illegal cigarettes may reach approximately 50pc soon,” he said.