OICCI urges excise reforms to combat illicit tobacco trade 

KARACHI: The Overseas Investors Chamber of Commerce and Industry (OICCI), in its taxation proposal for 2025-26, has proposed that the Federal Government rationalise excise rates to help the duty-paid segment reduce price inflation, making it more competitive against illicit tobacco brands. 

It suggests strengthening the Track & Trace system with better retail enforcement and improved coordination among tax and smuggling control agencies to address the issue of untracked cigarette packs and counterfeit stamps. 

Pakistan loses Rs750 billion in tax revenue per annum due to illicit trade and smuggling, reflecting that smuggling and illicit manufacturing are expanding across tobacco and petroleum products. 

Stricter penalties should be enforced on illicit tobacco production and sales to deter illegal operations. 

The current adjustable advance Federal Excise Duty (FED) on acetate tow is excessively high at Rs44,000 per kg, which imposes a significant financial burden on the compliant industry. 

The Overseas Chamber recommended reducing the rate to Rs4,000 per kg and ensuring strict enforcement to prevent smuggling via Afghan Transit Trade. 

FED rates for premium cigarettes may be maintained while reducing the value tier rates by 25 per cent, lowering the rate from Rs5,050 to Rs3,800 per 1,000 cigarettes, the proposal added. 

It urged full reconciliation of the advance tax collected from GLT units. 

Implement and expedite the enforcement of SRO 96(I)/2021 to limit the movement of taxable goods from non-tariff areas like AJK into taxable regions, aiming to reduce tax leakages. 

Enforce STGO 07/2021 to ensure that illicit cigarette brands (over 200) are registered with the FBR, bringing untaxed brands under formal taxation, the proposal went on to add. 

Enforce SRO 127(KE)/2017 to ensure compliance with the Health Warning Ordinance, requiring graphic health warnings (GHW) to appear on 60 per cent of all cigarette packs. 

The Overseas Chamber proposed launching public awareness campaigns to educate the public on the health risks of illicit cigarettes and promote support for legitimate companies, helping to reduce demand for illegal brands. 

The Khyber Pakhtunkhwa Provincial Excise Duty creates a double tax burden on the legitimate sector and is inconsistent with the Constitution. Immediate action is needed to remove this anomaly and eliminate the KPK PED, the proposal added. 

 Read next: Oil prices edge higher as US tightens Chevron’s Venezuela operations