Furthermore, he said illegal practices caused an estimated Rs 40-50 billion annual loss to the national exchequer, which is no small matter in a country where the tax-to-GDP ratio stands at a dismal 10.2.
The cigarette industry is known to make significant contribution to tax collections. Even as 18.5 percent of the activity in the sector comprises either smuggled or duty-evaded products, it remains a key source of revenue for the FBR fetching 39 percent in Federal Excise Duty and 3.5 percent of total tax collection. Needless to say, fixing the loopholes will further enhance collections. Towards that end, the workshop participants called for action into two areas: curbing smuggling and illegal manufacturing of cigarettes. So far as the first problem is concerned, it is not peculiar to Pakistan though it is much serious in terms of comparative magnitude. Successful examples from other countries show that performance-related rewards among customs officials enhance efficiency levels in controlling smuggling. A similar incentives-based system needs to be introduced here as well.
Counterfeiting presents a bigger challenge. FBR officials at the workshop emphasised the need to promote expertise in the identification of illicit and counterfeit cigarettes as a first step in that direction. Which would be useful, but not as a stand-alone measure. The unsavoury reality is that imitation of well established brands of all kinds of products, ranging from medicines to aerated drinks and toiletries, is rampant in this country. It is not difficult to identify most of these counterfeit products. Yet the activity has gone on unchecked, in some instances, at a considerable risk to public health. Clearly, the issue is not just the concerned officials' inability to tell the difference between a genuine and a fake product, but lack of will to take action. It is good to see the FBR getting ready to go after smugglers and cheaters in the cigarette industry. It remains to be seen though how far its resolve to achieve results lasts. Smuggling and counterfeiting in other areas also need to be checked to increase tax collection, if not to remove health hazards inherent in some of the fake products.