ISLAMABAD, Feb 7: The Federal Board of Revenue (FBR) intends to restructure taxes on cigarette by withdrawing middle tier of Federal Excise Duty (FED) slab to overcome the shortfall of Rs30 billion in revenue during the current fiscal year.

However, tobacco industry claims that such a move would increase grey markets for cigarette industry.

In a letter to the FBR, tobacco companies said serious measures need to be taken to curb the illicit tobacco industry before changes in the tax structure.

“According to one estimate, by only controlling smuggling of foreign brands, the revenue share of legal industry can jump to $1 billion annually,” the letter to FBR read, adding that the legal tobacco industry contributes a major share of around 37 per cent in the total FED and 3.5 per cent in the total annual revenues of country.

“If FBR goes ahead with the proposals, without accounting for the negative consequences, and makes legal amendments, it will result in an increase in prices of legal cigarette brands. This would create huge space for illegal brands which are showing a fast growing trend already,” it added.

It was highlighted that there are more than 600,000 outlets in the country where illegal brands are sold with impunity without any fear of law.

The letter also said that decline in legal cigarette industry in the country would also have a negative impact on the sizable population whose sustainability depends on the tobacco industry, including the growers.

Around 98 per cent of tobacco is grown in KPK and 78 per cent of total Virginia tobacco produced in country is grown in Swabi.