Pakistan Tobacco Company Contributes Rs 60 Billion as Revenue to National Kitty

Source from:  Business Recorder  02/19/2014

The Federal Board of Revenue (FBR) has received over Rs 60 billion as revenue from a leading cigarette company on account of federal excise duty (FED), sales tax and income tax, showing a growth of 20 percent for year ending December 31, 2013. Sources told Business Recorder that Pakistan Tobacco Company (PTC) on Tuesday announced its yearly results for the year ending December 31, 2013, declaring a final dividend of Rs 6 per share for the year.

According to the financial results, the company contributed more than Rs 60 billion to government kitty on account of excise duty, sales tax and income tax, depicting a healthy growth of 20 percent as compared to the same period last year. The growth in tax contribution even surpassed the company's net turnover growth in 2013.

Details revealed that the company during the same period declared a profit of merely Rs 3.1 billion. Over the years, tobacco industry has become a significant source of revenue for the government, owing to high taxation on the sector. Currently, the prevailing excise and sales tax structure imposes an overall tax of 71 to 81 percent on a pack price, in addition to customs duty on imports as well as any income tax payable by the company.

The year 2013 has been a harsh year for business in general due to challenging economic conditions including high inflation, security concerns, power crisis and rupee devaluation. Besides these challenges, the tobacco industry in particular has also been facing high level of illicit trade.

As per different international reports, more than a quarter of the market in Pakistan now falls in the illicit category. The cheap illicit brands are widely sold in the market, sometimes at a price much below the minimum tax payable per cigarette pack. The inflationary pressure and easy availability of these brands, consumers are ever willing to buy these illegal products putting further pressure on legitimate tobacco sector. According to industry sources, legitimate industry during 2013 has marginally declined versus the preceding year owing to these challenges. There is an urgent need of enforcement measures against these illicit brands to support the legitimate sector and address any revenue leakages, which according to estimates, can be as high as more than Rs 100 billion in the next five years, sources added. Enditem