Could this app help the government eliminate
SMUGGLED CIGARETTES?
A European company, in collaboration with a military-owned company, won the contract to help the FBR crack down on smuggled tobacco products, but some people are not happy
C
By Ahmad Ahmadani and Syeda Masooma
ould the answer really be as simple as an app? For decades now, the tobacco industry has lobbied the government of Pakistan to crack down on smuggled cigarettes and other tobacco products, and the government has been inclined to help them, in large part because the government itself derives an inordinate amount of taxation revenue from the industry. But after decades of failing to make a dent in smuggling activity, the government may finally have found a solution that uses sophisticated technology to help crack down on smuggling activity. But as with everything in the government, matters are complicated with allegations of wrongdoing over who got the contract to set up the government’s tracking and tracing systems. First, some context is in order.
Tobacco and taxes
A
s a percentage of the size of the economy, tobacco is a tiny fraction, accounting for just over 3% of consumer spending in Pakistan, and less than 2% of the total size of the economy. Total Pakistani consumer spending on tobacco products is just shy of $300 million, according to Profit’s analysis of data from the Pakistan Bureau of Statistics. Yet the industry punches above its weight when it comes to its importance to Pakistan’s taxation system. In the fiscal year ending June 30, 2019, the tobacco industry accounted for Rs117 billion in taxes paid to the government, according to data from the Federal Board of Revenue (FBR), or about 3.1% of total revenue collected that year. Of that amount, Rs90.9 billion was paid in the form of federal excise duties and Rs26.1 in the form of sales taxes. Tobacco may be the most heavily taxed sector in Pakistan. Despite there being several companies larger than it, Pakistan Tobacco Company – the local subsidiary of British American Tobacco and the largest tobacco company in the country – paid more in taxes than any other entity in the country. During the calendar year 2018, Pakistan Tobacco paid Rs92.2 billion in the form of excise duty, sales tax, custom duties, surcharges and income
28
