ISLAMABAD: The Special Committee of the Senate on Cause of Decline in Tax Collection of Tobacco Thursday expressed displeasure over inefficiency of the Federal Board of Revenue, which caused revenue loss of billions of rupees to the national exchequer following revision in tax structure for the tobacco industry.
The committee met in the chair of Senator Kalsoom Parveen and Auditor General of Pakistan disclosed during the briefing that after introducing the third tier of taxes, the sale of tobacco companies has risen over 31.64 per cent while the tax collection inched up only to 4 per cent.
The committee observed that after the unveiling of the third-tier based Federal Excise Duty (FEDF) structure in May 2017, the tobacco industry players shifted their famous brands to the lowest duty slab, which drastically reduced federal excise duty by Rs31 billion while contrary to it, their tobacco sales were increased.
The 3-tier based FED structure was introduced with almost 50 percent cut in the FED rate.
The chairperson criticized the FBR for its failure to check this revenue loss and said that at a time when Pakistan was in dire need of finances, losing a potential taxes of around Rs31 billion, which was very unfortunate
The committee asked the FBR to come up with details during next meeting of all those factory owners who were making unbranded cigarettes and action taken against them.
The committee was of the view that it was not a difficult job to check these tax gaps and collect potential tax from tobacco companies by putting in place different filters to detect leakages in taxation.
The committee members blamed that this tax evasion was not possible without the support of some FBR officials for personal gains.
On the occasion, the representatives of FBR, led by its Chairperson Rukhsana Yasmin, informed the committee that the loss was incurred due to flooding of market by non-paying illegitimate cigarette brands available at very cheaper rates.
They informed the committee that some of these brands were being manufactured in Azad Jammu and Kashmir it was not possible for them to check such practices in Azad Jammu and Kashmir due to jurisdiction limit however they could set up check posts to check such brands crossing into Pakistan.
The FBR representatives said that imposition of 5 per cent advance tax on purchase of tobacco was meant to detect tax evasion. On the occasion, Pakistan Tax Board (PTB) informed the committee that other than CESS it had collected about Rs461.4 million advance taxes at the rate of 5 per cent on purchase value of tobacco.
(This news/article originally appeared in The Nation on August 10th, 2018)