Islamabad : The Pakistan Tobacco Company has 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 released, during the year, the company contributed more than Rs. 60 billion in Government revenues on account of excise duty, sales tax and income tax, depicting a healthy growth of 20% over the same period last year. The growth in tax contribution even surpassed the company’s net turnover growth in 2013. It is worth noting 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 pack price, in addition to customs duties 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 levels of illicit trade prevalent in the country.

Reports say 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 pressures and wide availability of these brands, consumers are ever willing to down trade to 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.

According to official sources, there is an urgent need to enforce 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 100 billion rupees in the next five years.