ISLAMABAD: Experts put forwards three suggestions to the Federal Board of Revenue, urging the broad to consider these fundamental questions while deliberating the proposal to affix security labels or tax stamps to excisable goods including cigarettes.
As per details, the experts questioned as to why Turkish government did not renew the contract with the international company offering tax stamping in 2011? They said that it should also be looked into as to whether or not the plan implemented for 5 years reduced illicit trade of excisable goods? Thirdly, did the tax stamping to cigarettes increased government revenue in the said country?
It is to be noted that the FBR has been appeared cautious in considering all options available and wants to exhaustively study the system as well as its international precedents prior to a final decision in this regard.
Turkey introduced a paper-based tax stamp for tobacco products and spirited beverages in 2006. The technology was offered by a Swiss company that is now approaching FBR to implement that very solution in Pakistan. Following a public tender in 2011, the Turkish government decided not to renew the contract of the same company.
As per official custom authorities data, before this technology solution of tax stamps were implemented in Turkey in 2006, illicit tobacco (smuggled, counterfeit and tax-evaded) accounted for around 6 percent of the market. By 2011, illicit trade had increased by more than 300 percent, to 20 percent. Thus the technology based solution of security labels or tax stamps failed to tackle illicit trade.
The production of counterfeit excisable products was not properly checked despite implementation of tax stamping on cigarettes in Turkey. Print designs, holograms, colour shifting inks and other claimed ‘secure’ features of the paper stamps were quickly copied by criminal networks. The copies are sometime often so good that consumers and even enforcement authorities cannot easily determine whether the tax stamp is genuine or not.
