Philip Morris announces 100pc increase in after tax quarterly profit

Philip Morris announces 100pc increase in after tax quarterly profit

KARACHI: Philip Morris (Pakistan) Limited, makers of cigarettes in the country, has announced around 100 percent increase in net profit for the quarter ended March 31, 2021.

According to financial results submitted to Pakistan Stock Exchange (PSX) on Tuesday, the profit after tax for the quarter ended March 31, 2021 increased to Rs718 million as compared with Rs361 million in the corresponding period of the last year.

During the period ended March 31, 2021, the company’s domestic net turnover stood at Rs4.44 billion reflecting increase by 6 percent versus same period last year.

Increase in Distribution & Marketing expenses showed commitment by the Company to continuously allocate the resources for Commercial initiatives which can earn the best returns. Further, we continue to find efficiencies in Administrative Expenses to ensure the increase remains under inflation.

During the same period ended March 31, 2021, the company’s contribution to the National Exchequer, in the form of excise duty, sales tax and other government levies, stood at Rs7,089 million (higher by 23.3 percent compared to the same period last year) reflecting 61.1 percent of first quarter of 2021 Gross Turnover.

Giving industry background, the company said that the lack of a level playing field is one of the key challenges for the legally compliant tax paying cigarette industry.

In 2013, the share of non-tax paid illicit sector was 23 percent but due to sheer lack of enforcement, it has now captured almost 40 percent of the market.

Significant and excessive excise increases over the past few years have widened the price gap between legal and non-tax-paid illicit cigarettes thus facilitating downtrading and contributing to the exponential growth of the illicit cigarette sector.

Excessive excise duty increases of 93 percent on Value Tier brands (i.e. from Rs17/pack in April 2018 to Rs33/pack in June 2019) during Federal Budgets of September 2018 and June 2019 have stretched the price gap and non-tax paid illicit brands continue selling at below minimum price prescribed under tax laws i.e. Rs63/pack.

Further countless tax-evading brands of cigarettes across the country are being sold as low as Rs25/pack (avg. illicit price is Rs38/pack). For reference: Total Tax/pack (Excise & Sales Tax) on value brands is Rs44/pack.

The company said that it had support the introduction of Track and Trace system as it will be an effective tool to supplement enforcement efforts against tax evasion.

However, since 2019, the Federal Board of Revenue (FBR) has made multiple attempts to implement the system but, till date no major progress has been made on this front.

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