ISLAMABAD: As Pakistan continues to lose billions of rupees every year due to the alleged illicit tobacco trade, high-handedness of multinational companies and loopholes in the system, the Federal Board of Revenue (FBR) has been suggested to substantially increase federal excise duty on illegal tobacco trade, without increasing the local tobacco consumption, as it would help in generating about Rs 260 billion revenue annually.
According to details, the proposal has been submitted to the FBR which is in the process of making national budget amid the coronavirus pandemic which has shattered the country’s economy.
“We anticipate that our proposal has the potential to substantially increase duty paid volume (whilst not increasing consumption) and Federal Excise Duty (FED) revenue to reach Rs 260 billion annually at the end of the programme,” says the proposal, filed by a local firm, based on a detailed study about key issues related to the tobacco industry.
The seven-year plan, based on a detailed study, will not only help a steady increase of revenue, but also it will provide a breathing space for the local tobacco companies whose competitiveness is eroding due to international brands’ alleged high-handedness.
The proposal has recommended establishment of a multi-stakeholders Illicit Trade Enforcement Board.
It also said that success of the proposal hinges on FBR’s commitment to enforcement so that all economic operators, large and small, local and foreign, participate to the fullest extent.
Talking about major factors responsible for the sub-optimal government revenue, the government has been proposed to make a temporary change to the current FED structure by splitting the current second tier into a mid-price tier and a local-price tier.
Over the course of the seven-year period, the minimum price and FED rate of the local-price tier will rise more sharply than that of higher tiers, thus achieving a high degree of convergence, the proposal said.
About the elimination of illicit trade from the tobacco market, the proposal said that the FBR should produce and validate an accurate register of the domestic manufacturing locations, strict enforcement of license criteria to operate machinery, require the machinery owners/operators to accurately report monthly quantities produced of each brand as well as the quantities sold ex-factory to distribution entities.
In order to curb illegal import, the proposal said there should be limited number of designated import stations for tobacco products.
It also recommended FBR to operate a system of surveillance to ensure it has intelligence on the most used illegal import routes so that controls can be strengthened.
