Non-duty paid cigarettes: smuggling of foreign brands continued throughout 2012

Created on Wednesday, 02 January 2013 Written by Business Recorder
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The smuggling of foreign brands of non-duty paid cigarettes continued during 2012 as these brands are abundantly available in market despite Federal board of Revenue (FBR) anti-smuggling and enforcement drive across the country. 

Industry sources told Business Recorder here on Tuesday that the smuggled brands like Pine and others are available in the markets, unmasking presence of formal supply chains for these products. Pine is readily available at any retail outlet at less than half the price of a locally manufactured legal brand since it is without any levies or taxes which any legally imported brand is required to pay. As a result of the violation, massive revenue loss is being witnessed but surprisingly the government seems unmoved on the issue. The illicit trade of smuggled cigarettes has compromised government tax revenues in the form of sales tax and federal excise duty. 

The crackdown and flurry of advertisements with warnings messages by the FBR over the past few months against smuggled brands was a step in the right direction, but the retailers and dealers seems undeterred. Whether these efforts by the FBR will be helpful in eliminating smuggling and tax evasion in cigarettes or not, is yet to be seen, but there is undeniable lack of enforcement capacity by the authorities to stop unlawful influx of smuggled brands in the country. The government should take actions and penalise unscrupulous elements smuggling branded cigarettes into Pakistan. 

They said that rampant sale of smuggled cigarette brands is a clear violation of national laws but the government seems unmoved by the recent spike in sale and availability of smuggled products throughout the country. According to industry data, the overall volume of illicit trade has noticeably increased. The main contributors to sharp rise in sale of illicit cigarettes are the phenomenal growth in sale of smuggled brands. This is in sharp contrast to all local cigarette brands being sold in Pakistan, most of which had stagnant sales or minimal growth during the same period. The rise in smuggling hints not only at weak enforcement by the government, resulting in free flow of illegal goods across the borders and proliferation of such goods at various retail outlets, but also towards the fact that the stagnation of economic growth and inflationary pressure on consumers are creating more demand for cheaper duty evading smuggled brands. The demand for cheap smuggled brands creates the incentives for those who supply such smuggled goods to the consumers. As the deterrence of law enforcement is weak, this black market is mushrooming, they added. 

Copyright Business Recorder, 2013

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