The critical need for the proper implementation of the Track and Trace System to combat the sale of smuggled and illicit cigarettes in Pakistan was stressed by Mona Iskandarani, Area Head of Legal & External Affairs, Asia Pacific, Middle East, and Africa (WEST) at British American Tobacco (BAT) Group, on Tuesday during a media briefing organised by the Pakistan Tobacco Company (PTC).
During the briefing, Iskandarani addressed the efficacy of the system in the tobacco sector.
She emphasised, “The success of Track and Trace will depend upon the implementation of the system in its true letter and spirit across the board coupled with a sustained enforcement drive in order to control the sale of smuggled and illicit cigarettes.”
Representatives from PTC shed light on the implementation status of Track and Trace in Pakistan, pointing out that delays in enforcement were causing significant losses for the legitimate industry. Ms. Iskandarani further noted, "In order to ensure that the quantum of illicit trade is controlled within the country, it must be coupled with strong enforcement and fiscal measures."
While acknowledging the recent enforcement initiatives by the Federal Board of Revenue (FBR), she stressed the need for sustained efforts across the supply chain to combat the menace of illicit cigarette trade in Pakistan.
Read Illicit tobacco sector outgrows legitimate one
Director of Legal & External Affairs at PTC, Asad Shah, clarified that while Track & Trace had been implemented in various countries, it wasn't a silver bullet solution to fighting illicit trade. Instead, it served as a tool for law enforcement agencies to conduct raids and seize tax-evaded products.
Shah revealed that, despite a 15-month lapse since the implementation deadline, only 2 out of over 40 cigarette manufacturers had implemented Track & Trace as intended. The incidence of illicit trade had increased, contrary to the system's purpose of reducing duty and tax evasion.
Shockingly, since Track and Trace's implementation in Pakistan in July 2022, the illicit sector's share had grown from 37% in FY 2021/22 to 63% by the end of FY 2023/24. This alarming increase is expected to cause a revenue loss of approximately Rs 310 billion to the government in FY 2023/24.
Illicit manufacturers openly flouted laws by using counterfeit stamps, placing stamps over polypropylene wrapping on cigarette packs, and even applying stamps manually. This undermined the purpose of the Track and Trace System, which aimed to monitor production volumes. Illicit cigarette packs without Graphical Health Warnings and Track & Trace stamps were freely available in the market.
The majority of Duty Not Paid (DNP) cigarettes were being manufactured in AJK, requiring stringent enforcement measures at entry and exit points to prevent tax-evaded cigarettes from entering the country.
The battle against illicit cigarette trade in Pakistan depends on swift and comprehensive implementation, coupled with sustained enforcement efforts. It is essential to preserve the integrity of the tobacco industry and protect government revenues.
Published in The Express Tribune, November 8th, 2023.
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