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Profit of cigarette companies has increased despite reduced production

12:11 AM | 8 Jun, 2023
Profit of cigarette companies has increased despite reduced production


ISLAMABAD - Despite a substantial decline in declared production by cigarette manufacturing companies, their turnover and gross profit have increased during the first nine months of the current fiscal year, reflecting that the firms are falsely reporting their production to avoid taxes and influence tax policy.

These views were shared during an event organised by the Society for the Protection of the Rights of the Child (SPARC) to the launch of the policy brief ‘Facts vs Industry Narrative: Cigarette Production and Taxation in Pakistan’, published by Social Policy and Development Centre (SPDC).

Muhammad Sabir, Principal Economist of SPDC said that there are three listed companies which are the country’s major cigarette producers, accounting for more than 90% of total cigarette production in Pakistan. These include Pakistan Tobacco Company (PTC), Phillip Morris Pakistan (PMPK), and Khyber Tobacco Company.

Analysis of the financial statements of these companies reveals that the net turnover and gross profit of the companies altogether increased from 72 billion Rupees during Jul 2021 – Mar 2022 to 94 billion Rupees during Jul 2022 – Mar 2023. Gross profit also increased from 33 billion Rupees to 46 billion Rupees during the same period.

Interestingly, during the quarter of Jan-Mar 2023, when tax rates were increased substantially and declared production declined to half, companies’ profits did not fall. This means the tobacco industry is underreporting its production to avoid taxes. If it is not, then the industry shouldn't have any complaints about the increased taxes because its profits have increased. But the industry is complaining about the taxes as well.

Muhammad Sabir stated that the cigarette industry has used various tactics, such as front-loading and abrupt changes in production, to avoid tax hikes and influence tax policy. That is why changes in prices or taxes do not explain fluctuations in cigarette production. For example, the most significant increase in cigarette prices occurred in March 2023, while the most significant decrease in production occurred in July 2023. The trend in monthly cigarette production since 2011-12 indicates that this is not the first time that cigarette production has fallen to one billion sticks. The industry has practised this tactic many times to avoid the increase in taxes.

Mr Malik Imran, Country head of Campaign for Tobacco-Free Kids (CTFK) stated, as far as the tax revenue is concerned, the total tax revenue paid by these companies (including FED and GST) has increased from PKR114.5 billion from July21-March22 to PKR127.5 billion in the first nine months of the current fiscal year, representing a growth of 11.3 percent. He mentioned that the tobacco industry has always tried to derail the government’s efforts of reducing tobacco hazards through various deceptive tactics.

Cigarette manufacturers operate solely for their own profit and they don’t care whether the economy or public health suffers. Imran stated that the analysis presented in the policy brief refutes the cigarette industry's claims about the negative impacts of higher cigarette taxes.

Khalil Ahmed Dogar, Program Manager SPARC said that the deadly products made by the tobacco industry are causing 465 deaths and making 1200 children addicted every day. The profit of cigarette companies has increased despite reduced production. Why should we keep tobacco taxes stagnant just because the industry is saying so? Statistics coming from an industry which tries every dirty trick in the world to sell harmful products, cannot be taken seriously.

He added that tobacco Control efforts require bold steps and the government’s decision to increase tobacco prices is a much-needed and praiseworthy step. This decision has already paid dividends for the economy and it will generate more revenue as well as decrease health burden. However, to achieve this double benefit, the government must remain steadfast by not falling for tobacco industry’s misinformation campaign.

Daily Pakistan Global Web Desk

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Currency Rates in Pakistan Today - Pakistani rupee to US Dollar, Euro, Pound, Dirham, and Riyal - 19 April 2024

Pakistani currency saw minor adjustment against global currencies on April 19, 2024. US dollar was being quoted at 277.4 for buying and 280.4 for selling.

Euro comes down to 293 for buying and 296 for selling while British Pound stands at 342.25 for buying, and 345.65 for selling.

UAE Dirham AED was at 75.2 and Saudi Riyal's new rates was at 73.30.

Today’s currency exchange rates in Pakistan - 19 April 2024

Currency Symbol Buying Selling
US Dollar ‎USD 277.4 280.4
Euro EUR 293 296
UK Pound Sterling GBP 342.25 345.65
U.A.E Dirham AED 75.2 75.9
Saudi Riyal SAR 73.3 74.05
Australian Dollar AUD 181 182.8
Bahrain Dinar BHD 740.09 748.09
Canadian Dollar CAD 201 203
China Yuan CNY 38.44 38.84
Danish Krone DKK 39.69 40.09
Hong Kong Dollar HKD 35.53 35.88
Indian Rupee INR 3.33 3.44
Japanese Yen JPY 1.86 1.94
Kuwaiti Dinar KWD 902.64 911.64
Malaysian Ringgit MYR 58.08 58.68
New Zealand Dollar NZD 164.22 166.22
Norwegians Krone NOK 25.31 25.61
Omani Riyal OMR 722.87 730.87
Qatari Riyal ‎QAR 76.45 77.15
Singapore Dollar SGD 204.5 206.5
Swedish Korona SEK 25.31 25.61
Swiss Franc CHF 305.08 307.58
Thai Bhat THB 7.56 7.71

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