Cigarette-making co proposes adjustable excise duty of Rs4000/kg on cigarette paper

Business Recorder

2 days ago

ISLAMABAD: A leading multinational cigarette manufacturing company has proposed Federal Board of Revenue (FBR) to introduce both fiscal and strict administrative measures in budget (2025-26) including adjustable excise duty of Rs 4000 per kg on cigarette paper for documentation.
In a pre-budget media briefing, Syed Asad Ali Shah, Director Legal and Corporate Regulatory Affairs, Pakistan Tobacco Company (PTC) informed media here on Wednesday that the illicit trade of cigarettes is now the market leader with 58 percent share in the market. Total market is around 80 billion sticks of cigarettes. The FBR collected revenue from 67 billion sticks in 2013, which has been reduced to 34 billion sticks in 2025, resulting that no tax would be collected on 46 billion sticks due to growing share of smuggled and illicit cigarettes in the country. This clearly shows that the share of duty paid cigarette is going down every year after increase in excise duty and share of illicit cigarettes in Pakistan. The market share of illicit cigarettes has reached to an alarming level of 58 percent.
He stated that the price differential between the duty paid and non-duty paid cigarettes is increasing and consumption is rapidly shifting towards non-duty paid cigarettes.
He quoted example of Malaysia where the share of illicit trade of cigarettes reached 80 percent and the company was forced to close its factory. 'If the government is unable to control the share of illicit trade in Pakistan, we might be forced to close factories in the country. The total production of two factories has come down by 50 percent due to the factors cited above. Both factories are running 50 percent of the capacity during the last three years.'
According to Shah, the sector has the potential to contribute Rs 570 billion annually in tax revenue, but only Rs 292 billion was collected in 2023-24, and Rs 223 billion so far in the first 11 months of the current fiscal year.
He said it is impossible to generate the remaining Rs 50 billion in just one month, highlighting deep-rooted tax evasion and the role of certain non-governmental organizations working on specific agendas.
'We do not want that cheap cigarettes should be available in Market, but only tax paid cigarettes should be sold in Pakistan,' Asad Shah said.
He said the company has recommended administrative measures to control illicit trade including tobacco crop reconciliation.
The industry had proposed excise duty of Rs 4,000 per kg on acetate tow. Through Finance Act, 2024, FED @ Rs 44,000 per kg was imposed on acetate tow. Resultantly, the smuggling of acetate tow becomes lucrative.
The FBR had seized 45 million ton acetate tow after imposition of 44,000 per kg FED last budget.
The company has also proposed strict monitoring of the GLT units in the country.
He regretted that the experiment of tax stamps on cigarettes has failed and cost Rs 1.5 billion per annum. 'If there is no compliance at the point of sales, there is no use of the tax stamps,' Asad Shah added.
Shah urged for strict enforcement of documentation policies across the entire industry, noting that the government-set minimum price for a cigarette pack is Rs 162.25, whereas 18 billion sticks are being sold at or below Rs 150 per pack, evading taxes.
He pointed out that no one has ever been penalized for violating the minimum price law. He recommended raising the minimum pack price to counter the perception of cigarettes being cheap in Pakistan.
'No policy can succeed without non-discriminatory implementation,' he stressed, adding that locally-manufactured cigarettes without tax stamps are openly sold.
Shah further proposed that if the track-and-trace tax stamp policy cannot be implemented uniformly, it is ineffective. He recommended reducing the adjustable tax on cigarette filter material acetate tow from Rs 44,000/kg to Rs 4,000/kg to curb smuggling.
Copyright Business Recorder, 2025