ISLAMABAD: The Federal Board of Revenue received over Rs17 billion FED, sales tax and income tax from a leading cigarette manufacturer during January-March 2014, showing an increase of 21 percent as compared to last year.
According to quarterly results announced by Pakistan Tobacco Company for the first quarter ended on March 31, 2014, the company contributed more than Rs17 billion to government revenues on account of excise duty, sales tax and income tax, which depicts a 21 percent increase over the corresponding period last year. The growth in tax contribution even surpassed the company’s net turnover growth. The company also declared a profit of Rs1.243 billion and earning per share of Rs4.87.
On the other hand, the FBR officials were of the view that the FED collection was gradually improving from the cigarette manufacturers being major excisable commodity during 2013-14. The Board is closely monitoring the collection of the FED from leading companies on monthly basis, he added.
Experts said the tobacco industry is a major revenue spinner and contributed more than Rs76 billion in the form of taxes during 2012-13. The Pakistan Tobacco Company alone contributed more than Rs60 billion in the form of government taxes/levies during 2013. It has been estimated that the revenue contribution from the sector is expected to exceed Rs85 billion this year. The high revenues are attributed to high tax incidence on the sector. The revision of the slabs of the FED on cigarettes was also notified in last budget. The prevailing excise and sales tax structure imposes an overall tax of 71-81 percent on pack price, in addition to customs duties on imports as well as any income tax payable by the company.
More than 99 percent of the government revenue contribution from cigarette sector comes from only two companies. With increasing revenue contribution from these companies, the incidence of illegal trade in cigarettes is also increasing exponentially. The tax evasion in cigarette sector alone has resulted in huge loss in billions during past five years.
The cheap illegal brands on which no duty is paid are widely available across the country and are sometimes sold at a price much below the minimum tax payable per cigarette pack. Due to the low purchasing power, the consumers get attracted to these products, with retailers often pushing for these brands, enjoying higher margins. According to industry sources, legitimate industry has stagnated over the last few years owing to the problem of illicit trade, which is expected to further worsen in the wake of little or no enforcement. The government would continue to loss revenue if the illicit trade remained unchecked in coming days.
