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ISLAMABAD: The Federal Board of Revenue (FBR) has rejected the proposal of local and multinational companies to increase advance Federal Excise Duty (FED) from Rs10 to Rs500 on tobacco growers with the consultation of a Special Committee on Agricultural Products headed by Speaker National Assembly Asad Qaiser.

The FBR submitted this information in a meeting of the committee chaired by the speaker National Assembly on Tuesday.

The panel was informed that the FBR consulted all the stakeholders including multinational companies on a proposal from the private sector for the fully adjustable tax to be increased from Rs10 to Rs500 to indirectly create more revenue for the government.

However, after seeing all the evidence and potential negative impacts on the farmers, the FBR decided that the current regime for advance FED on tobacco leaf will remain unaltered.

It was also decided that the FED on tobacco leaf will remain intact for the year 2020-2021 at Rs10.

The Speaker National Assembly, Asad Qaiser, recommended a proposal for additional taxes on cigarettes meant for supporting government financing amid Covid-19.

Secondly, the FBR should increase tax on cigarettes and imported tobacco as Pakistan was a signatory to the WHO Framework Convention on Tobacco Control (FCTC).

Considering the risk and tax burden of advance FED being passed on to tobacco growers, the FBR discarded the proposal to increase advance FED from Rs10 to Rs500.

He added that cigarettes and imported tobacco being a luxury good with serious health implications were taxed heavily across the world and in the region, and ironically its prices in Pakistan were one of the lowest even during the worst respiratory pandemic ever.

He recommended that the FBR should strengthen its enforcement mechanism to prevent tax evasion and smuggling.

He requested the FBR not to ignore subsistence farmers in stakeholders' consultation processes.

Asad Qaiser stressed that exploitation of the farmers destroyed Pakistan's agriculture sector.

He explained that before analyzing tax policy on tobacco crop, it was extremely essential to understand the economic structure of the tobacco growing districts with small landholdings and single cash crop as the source of livelihood.

The tobacco farmers, with little or no bargaining power, become a victim of the race between the large international and local tobacco companies.

He added that farmers toil endlessly in the field but they could not cherish the fruit of their labour as they continued to face hostile markets and unfriendly policies who rob them of their justified profitability.

He added that good policy dictates to tax the end product in the value chain, and for that matter, the burden of taxation should be shifted to the end consumer of cigarettes.

The tobacco growers informed the panel that tobacco crop is the livelihood of more than 35,000 households, and previous tax policies though intended for the industry, badly dented the interest of the farmers through reduced competition and suppressed prices.

They added that policies obsessed with mere numbers without considering its impact on poverty of the farming community may further exacerbate their distressed financial conditions. Secretary Special Committee on Agricultural Products Wasim Gohar, while talking to this correspondent, said that various companies had submitted 52 million kg quota to Pakistan Tobacco Board this year, while in the previous it was 47 million kg.

Copyright Business Recorder, 2020