Cigarette brands of multinational firms: FBR chief informs Senate body about ‘historic’ increase in FED

ISLAMABAD: Chairman Federal Board of Revenue (FBR) Asim Ahmad said on Wednesday that the government has made historic increase in the Federal Excise Duty (FED) on cigarette brands of the multinational companies as compared to raise in the FED rates on brands manufactured by local tobacco sector.

The FBR chairman informed the Senate Standing Committee on Finance on Wednesday that anti-smuggling efforts have been reinforced and the FBR has made 811 seizures in which 61 million sticks of smuggled cigarettes were seized during 2022-23.

The committee members asked the FBR chairman to clarify the impression that the local industry has been squeezed. What are the steps taken for protection of the local tobacco industry against the multinational companies in the country?

Asim Ahmad informed that the government has not made major increase in the Tier-II slab of the FED which covers low brands of cigarettes. However, major increase in the FED on cigarettes was made for the brands manufactured by the multinational companies. In case of cigarette brands of multinational companies, locally produced cigarettes if their on-pack printed retail price exceeds Rs 9000 per 1000 cigarettes, the rate of the federal excise duty would be Rs 16,500 per thousand cigarettes. However, the FED on brands of local companies, the locally produced cigarettes if their on-pack printed retail price does not exceed Rs 9,000 per thousand cigarettes, the rate of the FED would be Rs 5,050 per thousand cigarettes, he said.

The FBR chairman stated that the FBR and tax authorities of Azad Jammu and Kashmir have signed an agreement on the exchange of information. There was a trend of shifting of manufacturing units to the AJK territory to avoid taxes. The AJK government has decided to implement the track and trace system at the manufacturing units located at the Azad Kashmir.

He stated that the taxation structure on cigarettes is still lowest in the region. The World Health Organisation (WHO) has recommended indirect taxation of 75 percent of the retail price of tobacco. Therefore, we have still not reached the level of taxation as desired by the WHO.

The FBR chairman added that three companies have fully implemented the track and trace system. Now, 1-2 more companies have signed an agreement with the FBR for installation of the system. The matter was in litigation at the Islamabad High Court (IHC) and judgment has been reserved. It is a breakthrough that the stay has been vacated and now the remaining companies would install the track and trace system at their manufacturing premises.

Copyright Business Recorder, 2023