In the absence of a comprehensive anti-illicit tobacco policy illegal tobacco business is growing fast across the country causing loss worth billions to the national exchequer. According to the ‘Asia-11: Illicit Tobacco Indicator 2012 study’, conducted by Oxford Economics, the consumption of illicit cigarettes is 25.4 percent in Pakistan.
The domestic illicit consumption makes up 21.9 percent out of the 25.4percent of the total illicit consumption in Pakistan; it is making the country as a market of consuming about 19 billion domestic duty-non-paid cigarettes, which is highest amongst the 11 surveyed countries.
‘Cricket’ an illicit cigarette brand is a good example of fast growing domestic illicit tobacco trade. This brand is being sold openly in the major cities of Punjab at a retail price that is much lower than the minimum price established by the government. Earlier, it was sold in Narowal, Dina and some adjoining areas of Lahore. But, now we can easily find this illegal brand being sold in the major urban centers like Lahore. However, no legal action has been taken against this and other such illicit brands resulting in the thriving illegal business that harms the legal industry and the national exchequer, which loses billions in terms of revenue.
Dr Muhammad Idrees, Assistant Professor and a renowned economist is of the view that the Oxford Economics Report clearly reflects the need that the government should focus more on domestic illicit tobacco as it stands at 86.3percent and Non-Domestic Illicit is only 13.7percent.
The report suggests that the government has been targeting the legal brands by heavy taxation to control the tobacco use but that approach is ultimately playing havoc with the country’s economy, as people are turning towards the illicit brands available on cheap prices.
According to the Oxford estimates, this rapidly growing business resulted in tax Revenue losses of about more than Rs 27 billion in 2012 only. The growing illicit cigarette market in Pakistan is a threat to global investors’ confidence. It exhibits the government’s inability to provide a crime-free and conducive business environment to the investors.
To curb this issue, the government will have to take this issue seriously and it should develop a comprehensive plan of action or strategy to counter it. Strict penalties for the convicted people and mass awareness about the damages caused by illicit tobacco brands could also help the government in addressing this issue. Illegal cigarettes also do not undergo stringent regulation in the form of health warnings, product checks, or age verification and; therefore, these are priced much cheaper than legal cigarettes.
Hence, the high-tax incidence, weak enforcement of laws, an unbalanced fiscal policy and low purchasing power of people could be dubbed as the main reasons for this rapid growth of this segment. The country’s economic managers know these problems very well and they only need to curb the illicit tobacco trade with implementation of laws or making those more stringent where required.