One of the leading cigarette manufacturing companies has contributed over Rs 41 billion in the form of duties and taxes to the Federal Board of Revenue (FBR) during January-June (2013-14), which is 31 percent higher than the same period last fiscal year.
Sources told Business Recorder here on Tuesday that Pakistan Tobacco Company has announced its half yearly results for 2014. According to the financial results, the company contributed more than Rs 41 billion to government revenues on account of excise duty, sales tax and income tax during January-June (2013-14), which is a 31 percent increase over the same period last year. The growth in tax contribution is even more that the company’s gross turnover growth of around 24 percent. The company also declared a profit of Rs 2.85 billion with earnings per share of Rs 11.84.
Tobacco industry is a big revenue spinner and contributed more than Rs 87 billion in fiscal (2013-14). According to tax experts, due to the increase in excise duties this year the revenue contribution from the sector is expected to be in the vicinity of Rs 102 billion this fiscal year.
More than 99 percent of the government revenue contribution in the tobacco sector comes from two companies. While the legitimate players are paying up their share of the levies, incidence of illegal trade in cigarettes stands at an alarming 25 percent + and has resulted in a loss of over Rs 80 billion to the government exchequer over the past five years.
When contacted, tax experts said that the cheap illegal brands on which no duty is paid are widely available across the country and are sometimes sold at a price much below the minimum tax payable per cigarette pack. Due to the low purchasing power, the consumers get attracted to these products. Not only that but the margins for the wholesalers and the distributors are also much higher for illegal cigarettes in comparison to the legal sector. Resultantly the legitimate cigarette sector suffers. Sources added that the enforcement against these illicit brands is being stepped up as national exchequer may lose more than Rs 100 billion in revenues in the next five years if nothing is done.
Source: Business Recorder