CIGARETTE INDUSTRY'S BLUES

The legitimate cigarette industry has been suffering from illegal competition from products


By DR. MUMTAZ AHMAD

May 17 - 23, 2004

Pakistan's legitimate cigarette industry finds itself in a straight jacket. It is squeezed by ever-increasing demand for higher revenues by the Government and for increased prices from tobacco growers; while tax-evasion and counterfeiting by hordes of small manufacturers and smuggled cigarettes ruthlessly nibble into the profitability of the ethical industry. These pressures are not only hurting the legitimate manufacturers but the national exchequer also suffers huge losses. Independent research studies point to massive financial damage that the government and the industry are enduring. Conservative estimates of losses to the national exchequer and the industry are Rs. 8 billion.

Pakistan's tobacco industry is the second largest contributor of excise duty in the country. The industry also makes a significant contribution to all sectors of the economy, from farming through manufacturing to distribution and retailing of the finished products. Its contribution to the national economy is much more prevalent than it would appear. The industry creates employment opportunities to over one million people and generates over Rs. 28 billion to value-added economy.

Despite its importance to the economy, the legitimate cigarette industry has been suffering from illegal competition from products that evade tax over the past two decades. Tax evasion fluctuated between 5 and 26% between 1984 through 2003 depending on the degree of law enforcement. From an average of 5% penetration of the market in the mid eighties, it rose to a deplorable level of more than 26% between 1993 and 1994. There has been a particularly alarming upward trend since 2001. According to one independent research estimate it has now grown to about 20% of the total cigarette market and is increasing. This is a serious threat to the formal tax paying sector of the industry besides causing huge losses to government revenue.

The national exchequer and the industries are enduring huge revenue losses due to tax evasion, counterfeiting and smuggling. Conservative estimates of losses to national exchequer and formal industry from tax evasion, counterfeiting and smuggling are over Rs. 6 billion and Rs. 2 billion respectively as researched by Overseas Investors Chamber of Commerce and Industry (OICCI).

In a recent survey of Transparency International (TI) Pakistan was ranked within the worst 25% of countries for governance. In an environment of inadequate and lax enforcement, corruption and inadequate punishment, a culture of tax evasion and smuggling is escalating unhindered.

COUNTRY PROFILE

Population

150 million

Population Growth

2.1%

Rural Population (61%)

89.7 million

Urban Population (39%)

53.3 million

Metro Cities

Karachi, Faisalabad, Lahore, Multan, Peshawar, Quetta, Rawalpindi/Islamabad

Literacy Rate

51.6%

Labour Force (Rural)

29.6 million

Labour Force (Urban)

13.06 million

Gross Domestic Product (Market Price)

Rs. 4.02 trillion

Per Capita Income

Rs. 29,925

I US $

Rs. 57.5

Source: Economic Survey 2002-03

TOBACCO PRODUCTION

The cigarette industry made its debut in the country in 1947 when the Pakistan Tobacco Company, the first multinational and an associate of the BAT Group, opened its operations in Karachi the then capital. While initiating construction of tobacco and cigarette factories Akora Khattak, Karachi and in Jhelum, the company also embarked on the production of cigarette type tobaccos, which previously had not been grown in the country. Concerted efforts by the company bore fruit. Production was concentrated in the North-West Frontier Province (NWFP) where the climate was most suitable. The company was instrumental in making Pakistan a significant producer of tobacco and cigarettes. Other manufacturers joined in the sixties and seventies and contributed to further growth and development of the industry.

Pakistan's formal tobacco industry takes rightful credit for introducing and popularizing modern practices of production that have successfully been disseminated to all other crops. The use of balanced fertilization, plant protection and other modern cultural practices which promote high productivity all owe their introduction to the tobacco industry. Indeed tobacco is the only crop in Pakistan, in which yields are among highest in the world.

Production of flue-cured Virginia, sun-cured rustica and Burley tobaccos is concentrated in the NWFP, where production and marketing are the biggest agricultural business activities. More than 0.3 million persons are directly or indirectly engaged in the production, processing and marketing of tobacco. The industry pumps in an estimated Rs. 3.5 billion annually into the economy of the province. Ancillary business activities generate another Rs. 2 billion. The following table gives production of cigarette type tobaccos during the past 20 years.

PRODUCTION OF CIGARETTE TYPE TOBACCOS

PERIOD

FLUE-CURED

SEMI ORIENTAL WP

OTHER AIR-CURED

1983-84

34

18

07

1984-85

35

23

10

1985-86

32

19

05

1986-87

26

17

05

1987-88

25

18

06

1988-89

24

21

05

1989-90

25

18

05

1990-91

31

18

06

1991-92

46

23

09

1992-93

54

19

08

1993-94

55

16

03

1994-95

43

11

02

1995-96

39

14

02

1996-97

47

17

03

1997-98

53

17

04

1998-99

60

18

05

1999-00

65

15

04

2000-01

51

10

03

2001-02*

61

09

03

2002-03*

61

08

04

Source: Pakistan Tobacco Board
* Industry Analysts

CIGARETTE MANUFACTURE

There are over 60 cigarette-manufacturing companies. The two major manufacturers are Pakistan Tobacco Company (PTC) and Lakson Tobacco Company (LTC). Their production units are located in the three provinces of Sindh, Punjab and the North-West Frontier Province (NWFP) at Karachi, Hyderabad, Jhelum, Mandra, Akora Khattak and Ismaila. Smaller units are located in the NWFP, Northern and Southern Punjab and in Azad Jammu and Kashmir (AJK).

The industry has the capacity to make about 120 billion cigarettes. Out of this, small units boast a capacity of 50 billion. While the two major cigarette companies have invested heavily in advanced manufacturing and packaging machinery such as the MARK 9 and LOGA MAX machines and compatible modern accessories, all other units indulging in tax-evasion, have re-furbished machinery imported from Holland, Dubai and UK-based subsidiary companies of the International Tobacco Machinery. Acetate tow is imported from Japan, UK and Germany, cigarette-paper from France, Austria, UK and Germany, tipping-paper from Spain and Germany, aluminium foil, polypropylene film, box board, printing, dyes and wrappers are available from local industrial units.

The table below gives documented production of cigarettes during the twenty years.

DOCUMENTED TAX PAID PRODUCTION OF CIGARETTES, 1983-84 TO 2002-03. (BILLION PIECES)

YEAR PRODUCTION
1983-1984 39
1984-1985 39
1985-1986 40
1986-1987 40
1987-1988 41
1988-1989 32
1989-1990 32
1990-1991 30
1991-1992 30
1992-1993 36
1993-1994 33
1994-1995 45
1995-1996 46
1996-1997 48
1997-1998 52
1998-1999 47
1999-2000 58
2000-2001 55
2001-2002 47
2002-2003 50
Source: Central Board of Revenue/Economic Survey 2002-03

GOVERNMENT REVENUES

The Industry's contribution to the national exchequer has more than doubled during the last ten years from Rs. 10.5 billion in 1993 to Rs. 21.5 during the current year. Of this total revenue 98.1%, came from two major companies and their 17 brands. The other 60+ manufacturers marketing over 145 brands, contributed Rs. 0.2 billion. The contributions to the national revenue in the fiscal year 2002-03 were Rs. 12.3 billion by PTC and Rs. 8.8 billion by LTC. However, had there been a level playing field with checks on tax evasion and smuggling this revenue would have touched Rs. 27 billion.

EXCISE DUTY

There are three levels of cigarette excise for high, medium and low tar categories of cigarettes plus a 15% sales tax (See table).

CURRENT LEVEL OF EXCISE DUTY AND SALES TAX

CATEGORY

RETAIL PRICE PER 20 CIGARETTE

CONSUMER PRICE

EXCISE DUTY

TYPE

EFFECTIVE RATE

SALES TAX

High

>Rs.22

>Rs.25

63% of retail price

Ad-valorem

63%

15%

Medium

>Rs.9.84 but <Rs.22

>Rs.12 - 25

Rs.4.20+ 69% of amount >Rs.9.84

Mixed (fixed) +Ad-valorem

43-56%

15%

Low

<=Rs.9.84

<Rs.12

Rs.4.20

Fixed

43%

15%

Under this tax regime (Excise Duty + Sales Tax), the minimum official levy comes to Rs. 5.66 per 20 sticks. Considering the cost of production, promotion, distribution and retail margins, no brand can enter the market with a price tag of less than Rs.10 for a pack of 20. But, in Pakistan, dozens of locally made brands are being marketed for Rs. 5 and Rs. 6 for a pack of 20. This comes to about 9 cents. If, and it is a big if, Government levies were paid, the manufacturers' gross incomes would be less than Rs. 01 per pack of 20 or about 1.5 cents. Considering the costs of promotion, distribution and the retail margin, one can only conclude that duty is evade.

CIGARETTE MARKET

Pakistan's cigarette market offers the world's cheapest cigarettes; thanks to tax evasion and smuggling. The low and medium-low tar category brands are available at Rs. 5-6 (about US $ 0.09-0.10), medium for Rs. 32 (US $ 0.29) and high category brands for Rs. 37-50 (about US $ 0.67-0.85). Korean manufactured smuggled brands from Afghanistan sell for Rs. 13 (US$ 0.23). The Legitimate cigarette industry has been vociferous in demanding an official clamp down on smuggling, counterfeiting and tax-evasion for the last 15 years. Government is losing billions of rupees, while corruption is booming. It is being feared that ill-gotten wealth of the tax-evaders may be used in other criminal activities.

Industry analysts had assessed a growth rate of 2.5% per annum in the early eighties, considering demographic changes, annual changes in tax structure and conversion to cigarettes from other cumbersome modes of consumption. The cigarette market was assessed as 63 billion cigarettes in 1999, including smuggled and tax-evaded sectors. The cigarette market for 2002-03 was assessed at 66+ billion cigarettes. Of this, legal and documented production is about 50 billion. The rest comes from tax-evaded-locally manufactured and smuggled cigarettes.

MARKET PROFILE 2003

Total Cigarette Market (Billion pieces)

66+

Legitimate market

<76%

Tax-evaded market

>24%

PACKING

Hinge-lid

78%

Shell & Slide+ Soft Cup

>20%

SHARE OF MAJOR BRANDS

Morven Gold

27.5%

Gold Flake

13.4%

Embassy

8.8%

Gold Leaf

7.3%

Capstan

5.3%

Diplomat

3.3%

K-2

3.0%

Royals

3.0%

Red & White

1.8%

Melbourne

2.0%

Gold Street

1.0%

Wills

1.0%

VOLUME SHARES OF MANUFACTURERS

Lakson Tobacco Company

40%

Pakistan Tobacco Company

36%

Others

24%

Source: CBR, Industry

Industry analysts have regularly been forecasting an average annual growth rate of 2.5%. Based on this assumption, a 40 billion production of cigarette in 1983 would have reached a figure of 66 million pieces in 2003. However, actual documented production in 2003 was 50 billion cigarettes.

The results of a recent market survey show an alarming upward trend with tax-evaded cigarettes smuggled and counterfeits being sold with impunity. Seventeen established brands of the two major companies accounted for about 76% of the legal cigarette market. There were over 65+ brands falling in price range of Rs. 6 or less for 20 cigarettes, which were all tax-evaded. There were 10+ brands locally made and considered counterfeits with a share of 0.5%. Smuggled genuine and counterfeits were 2.5%.

TAX PAYING AND TAX EVADING SHARE OF THE MARKET

Tax-paying brands:

No. of brands:

17+

Market share:

76%

Tax-evading locally made brands:

No. of brands:

65+

Market share:

>21%

Counterfeits, locally made:

No. of brands:

10+

Market share:

=0.5%

Smuggled genuine and counterfeits:

No. of brands:

65+

Market share:

=2.5%

Legitimate marketing:

. .

<76%

.

Tax-evaded marketing:

. .

>24%

.

(Source: Retail Audit Analyses)

Based on excise cleared production of cigarette for the year 2002-03 an even bleaker picture has emerged. Legitimate market share has further declined to 76% of the total market as shown in the table. Formal industry and marketing analysts have assessed share of the total market and tax-evaded, including smuggled and counterfeits as:

Total market

66+ billion cigarettes

Tax-evaded, Counterfeits and Smuggled

16+ billion cigarettes

Locally manufactured tax-evaded brands are produced in dozens of small units, some mobile, dotting NWFP, Tribal Areas, parts of Punjab and AJK. Tax-evaded cigarettes include local brands, locally-produced counterfeits of national and international brands and smuggled genuine and counterfeits.

Pakistan has become a paradise for tax-evaders and smugglers in an endemic climate of corruption, lax enforcement and outdated laws of punishment. In a recent survey by the Transparency International (TI) Pakistan's ranking was with the countries in the lowest quartile of governance. In an environment of inadequate and lax enforcement, corruption and lenient reprimand, a culture of tax evasion and smuggling is escalating unhindered.

During the past 20 years, small cigarette manufacturing units launched over 400 brands of low and medium price categories with marketing life of three to one year. Most of these brands were partly or wholly tax-evaded or counterfeits. At any one time, the market exhibited over 170 local and smuggled brands.

Continued marketing of duty-evaded cigarettes (locally manufactured and smuggled) is a bane of the legitimate industry and the government. The problem cropped up in the eighties, when special incentives were announced for setting up medium and small manufacturing units in the NWFP during the height of Afghan war. There was an influx of millions of refugees that had severely strained its economy. It was assumed that the policy would alleviate burden on the provincial economy. Several small cigarette making units were set up in the province during this period. Unfortunately, the good intentions of the government were abused by dishonest entrepreneur who started indulging in malpractices of tax evasion and theft of utilities. The problem of tax-evaded manufacture and smuggling of cigarettes kept growing during the turmoil years of Afghan war and reached its peak during the nineties.

There was a brief but significant check to tax evasion during 1999-2001 when enforcement efforts of the Central Board of Revenue (CBR) were augmented by the newly constituted National Accountability Bureau (NAB) and incidence of tax evasion dropped to less than 10%. However, lax vigilance and enforcement, after September 11, has again allowed tax-evasion to rise currently estimated at 20%+ of the total cigarette market and growing.

The Tax-evading entrepreneurs have shifted most of their units from their earlier bastion in NWFP to new location in AJK and Punjab. Massive tax evasion in all its criminal manifestations has resurfaced again to the detriment of government revenues and provocation of the legitimate industry.

SMUGGLING CHANNELS

Cigarette smuggling into Pakistan is another side of tax evasion hurting the national exchequer and the formal industry. Smuggling of genuine and counterfeit brands from Afghanistan was always a regular feature of the Afghan Transit Trade (ATT) agreement, a facility provided to land-locked Afghanistan. Smuggling under this channel is all-encompassing and not confined to cigarettes. A wide-range of commodities and finished goods, ranging from cosmetics, electronics, and clothing to consumer goods are imported and promptly dumped into the border provinces of Pakistan. Goods imported under ATT are not only delivered back to Pakistan but also find their way into Iran and the Central Asian Republics of the former USSR.

Surprisingly, during the harsh regime of the Taliban in Afghanistan, when TV stations were banned and the country was going through civil war, a sizeable quantity of TV sets were being imported under ATT by the Afghan traders.

Smuggled counterfeits and genuine international brands of cigarettes reach Pakistani market via Afghanistan across the 2000 KM long porous border.

There are two major smuggling routes from Afghanistan one across the Torkham border into Peshawar and the other the Chaman border into Quetta. A recent development is the availability of cheap, relatively well-made, Korean cigarettes. Korean made brands PINE and Mild-88 sell at Rs.13 per pack in Pakistan, especially in the NWFP, Northern Punjab and Balochistan. These cigarettes carry no health warning. An estimated 1.5-2.0 billion cigarette per annum reaches Pakistan via Afghanistan.

Still another route is from Dubai on launches plying the coastal areas of Balochistan and Sindh. High quality US and English brands, estimated between 0.5-1.0 billion cigarettes reach Pakistan through this route.

In a recent move to curb smuggling of cigarettes from Afghanistan the Government of Pakistan de-listed cigarettes from ATT agreement but enterprising smugglers have shifted their route via air from Dubai or the land route through Chahbahar port in Iran.

Smuggling of cigarettes from Afghanistan and from Dubai continues unabated to the annoyance of the government and legitimate industry. Corruption and lax law enforcement play a major role in smuggling.

CORRUPTION

Transparency International's (TI) survey on corruption of 85 nations in 1998 rated Pakistan the 11th most corrupt country, with rating score of 2.7 and India's 2.9 out of 10. Uganda, Kenya, Russia, Nigeria, Honduras, Paraguay and Cameroon were seen as more corrupt than Pakistan. A recent survey (2003) by TI showed a marginal improvement in governance. But Pakistan remained among the most corrupt countries in the world. It ranked 92 in transparency out of 133 countries.

In the budget 2003-04, an effort was made by the Government to check evasion on cigarettes. One measure is to compel cigarette manufacturers to disclose their cost structure so that the minimum price for suspicious cigarettes can be fixed. There are now provisions for seizure and confiscation of machinery used for manufacturing duty-evaded cigarettes. The manufacture of counterfeit goods is now a punishable offence under excise law.

HEAVEN FOR TAX EVADERS

Pakistan has become a heaven for tax-evaders and smugglers in a climate rife with corruption, lax law enforcement and outdated legal system of punishment for such crimes. Smuggling, tax-evasion and counterfeiting are not exclusive to tobacco products. It includes most of the consumer items marketed in Pakistan.

Cheap petroleum products smuggled from Iran and Central Asian Republics (CARs) are sold in provinces bordering Afghanistan and Iran. Fake counterfeits of brand-name lubricants are the bane of multinational and national oil companies. Smuggled international brands of consumer goods and counterfeits made in India, Korea, Thailand and China, are freely marketed. Locally-made fake cosmetics, soaps and detergents are openly sold. Unhindered and freely available CDs locally made and smuggled from India and China, has resulted in placing Pakistan on the watch list of the International Intellectual Property Alliance (IIPA). Smuggled cheap drugs from India and Iran are a cause for concern to national and multinational manufacturers of health-care products in Pakistan. A lower than expected cotton crop in Pakistan during 2003 was also partly blamed on fake pesticides.

A recent survey on cigarette evasion concluded that, although two major tobacco companies in the country manufacture about 50 billion cigarettes for the market, a number of tax-evading units also produce 14+ billions cigarettes to flood the market with their sub-standard, duty-evaded brands. This state of affair is not only an impediment to foreign investment but also damaging to legitimate manufacturers and deprives national exchequer of huge sums of revenue.

LUBRICANT INDUSTRY

Market size

300 million litres

Counterfeit

60 million litres

Revenue losses to Government

Rs. 1.2 billion +

Revenue losses to Companies

Rs. 01 billion

CIGARETTE INDUSTRY

Market size

66+ billion sticks

Tax-evaded, counterfeits and smuggled

16 billion sticks

Revenue losses to Government

Rs. 6 billion +

Revenue losses to legitimate manufacturers

Rs. 2 billion est.

PIRACY OF INTELLECTUAL PROPERTY

Losses (estimated)

Rs. 7.2 billion

(Source: Overseas Investors Chamber of Commerce and Industry)

The tax-evading units, while remaining well-entrenched in the NWFP and its Tribal Areas, additional manufacturing units have also appeared in Northern and Southern Punjab and AJK. There are 35 units indulging in tax-evasion and counterfeit brands NWFP boasts 17 such units, 12 units are operating in AJK and 4 units in Central & Northern Punjab.

The Overseas Investors Chamber of Commerce & Industry (OICCI), alarmed on unabated marketing of tax-evaded, fake and counterfeit products, prepared an aide-memoirs for the government, highlighting losses to the national exchequer, business houses and the economy. While the problem is faced by all legitimate businesses, three major sectors researched were lubricants, cigarettes and intellectual property. The table gives an up-dated estimate of losses.

WHITHER UNDOCUMENTED TOBACCO

The official watch-dog body, Pakistan Tobacco Board (PTB), and the major manufacturers maintain a fair assessment of tobacco production and documented records of purchases by the manufacturers.

Published record of the PTB shows that during the last 20 years a total of 285 million Kg. undocumented cigarette-type tobacco was procured by the intermediary merchants. Of this quantity an estimated 30% was for non cigarette usage. The balance about 200 million Kg. ended up with tax-evading cigarette manufacturers in the NWFP and its Tribal Areas, Central and Northern Punjab and AJK.

The following table gives statistics for the last 20 years of production and documented purchases and unaccounted tobacco.

 

PRODUCTION OF CIGARETTE TYPES

DOCUMENTED PURCHASES

UNDOCUMENTED PURCHASES

PERIOD

FLUE-CURED

SEMI- ORIENTAL WP

OTHER AIR-CURED

FLUE-CURED

SEMI ORIENTAL WP

OTHER AIR-CURED

UNDOCUMENTED

1983-84

34

18

07

31

15

04

09

1984-85

35

23

10

32

17

08

11

1985-86

32

19

05

27

16

04

09

1986-87

26

17

05

23

13

04

08

1987-88

25

18

06

22

10

06

11

1988-89

24

21

05

16

10

05

19

1989-90

25

18

05

21

10

04

13

1990-91

31

18

06

22

06

06

21

1991-92

46

23

09

38

11

09

20

1992-93

54

19

08

43

03

08

25

1993-94

55

16

03

41

06

02

25

1994-95

43

11

02

37

05

02

12

1995-96

39

14

02

37

07

02

09

1996-97

47

17

03

46

08

03

06

1997-98

53

17

04

48

07

03

16

1998-99

60

18

05

55

09

04

15

1999-00

65

15

04

63

04

02

15

2000-01

51

10

03

50

03

02

09

2001-02*

61

09

03

54

02

02

15

2002-03*

61

08

04

53

02

03

15

Source: Pakistan Tobacco Board * Industry Analysts

Industry analysts, basing their analyses on official statistics and market research studies, have come-up with the following actual and estimated tax-evaded production and projected formal market had there been no tax evasion.

TAX-PAID CIGARETTES, ESTIMATED TAX-EVADED AND PROJECTED PRODUCTION (BILLION CIGARETTES)

YEAR Actual Tax Paid Tax Evaded Cigarettes Projected Market
1984-1985 39 3 42
1985-1986 40 3 43
1986-1987 40 4 44
1987-1988 41 4 45
1988-1989 32 4 46
1989-1990 32 16 48
1990-1991 30 19 49
1991-1992 30 21 51
1992-1993 36 15 51
1993-1994 33 19 52
1994-1995 45 13 54
1995-1996 46 9 55
1996-1997 48 7 56
1997-1998 52 7 59
1998-1999 47 12 59
1999-2000 58 3 61
2000-2001 55 7 62
2001-2002 47 17 64
2002-2003 50 16 66
Source: CBR/Economic Surveys, Tax evaded estimates based on undocumented tobacco purchases and smuggled cigarettes

CONCLUSION

Formal tax paying industries and businesses are enduring an ever increasing and damaging competition from cheap contrabands, locally made and smuggled. Cigarette industry is not an exception though it is realized that inherent tax potential of this industry is grossly untapped because of unhindered marketing of contraband cigarettes. This state of affair is attributed to several factors like corruption, porous borders and inadequate enforcement. Government is aware of the problem and within its realm of resources promulgates rules to counter tax-evasion and smuggling.

Pakistan's tobacco industry is the second largest contributor of excise duty. Additionally, the industry makes significant contribution to all sectors of the economy from farming through manufacturing to distribution and retailing of the finished products. Its input to national economy is much more prevalent than it would appear. The industry creates jobs for over one million people and generates over Rs. 28 billion to value-added economy. However, the legitimate industry is weathering a damaging onslaught from tax-evading illicit cigarettes in the market. It is well researched conclusion that had there been an effective check on tax evasion and smuggling government revenue would have touched Rs. 27 billion and formal industry not deprived of an estimated loss of Rs. 2 billion.

The Government is aware of the situation and announced a regulatory measure in the budget 2003-04 to check evasion of excise duty on cigarettes, manufactured in Pakistan. It envisaged cigarette manufacturers to disclose their cost structure so that a minimum price for such suspicious cigarettes can be fixed. The budget also made provision for seizure and confiscation of machinery used for manufacture of duty evading cigarettes. Half way into the budget year, implementation of the rules has yet to be seen.

The Legitimate cigarette industry is rightly alarmed at the current trend of large-scale and unhindered availability of tax-evaded cigarettes in the market. The industry made a presentation to the government, highlighting losses to the exchequer and the plight of the formal sector and the public at large. It was pointed out that, while the government was losing over Rs. 6 billion, legitimate industry also suffers business losses to the tune of over 15 billion cigarettes. The tax-paying industry has made a plea for aggressive enforcement through multilateral agencies, severe legal action and re-structuring of excise duty. It also suggested for seizure and confiscation of machinery used for manufacturing duty-evaded cigarettes and making counterfeit products a punishable offence under excise law with stringent penalties. Pending, stern enforcement and severe punishment, government revenue and legitimate industry continue to suffer.

There is information available on tax-evading manufacturers. Also, information can be obtained on quantities of raw material purchased or imported that can provide the necessary statistics for levying tax. Similarly strict vigilance on smuggling routes and raids on suspected warehouses and retail outlets could check the menace of tax-evasion and smuggling. Unless such measures are strictly enforced tax evasion will continue unabated.

Dr. Mumtaz Ahmad has a degree in agricultural sciences from the University of Peshawar and a MS and Ph.D. degrees from the USA. He started his career as a teacher at Peshawar University and later joined private sector as an agri-business specialist for 18 years. In the early eighties, he joined the Ministry of Food and Agriculture and managed a number of bilateral development projects. His last assignment was as Sr. Consultant to the Ministry from where he retired in 1998.

Dr. Mumtaz Ahmad has to his credit several development studies and their implementation. He is a regular contributor to national and international media on agri-business matters. Since retirement he is working as freelance consultant with the UN agencies and private sector Japanese companies operating in Pakistan and Afghanistan.