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ISLAMABAD: A multinational cigarette manufacturing company has approached the government to reduce the Federal Excise Duty (FED) by 30 percent resulting in increased tax collection up to Rs 360 billion in 2023-24 as compared to the existing tax projection of Rs 243 billion.

The representatives of Pakistan Tobacco Company (PTC) informed reporters on Monday that the FBR has yet to implement the licensing brand name incorporated into Sales Tax law in the financial year 2021-22 through Finance Act under section 40-E.

Only two multinational companies including the Pakistan Tobacco Company and Philip Morris secured licensing brands but all other companies did not comply with the law of the land. So far, the FBR has not taken any action against those who breached the law.

The same is the fate of the much-hyped Track & Trace System as the two multinational companies are complying with it by stamping their manufactured cigarettes’ and costing them Rs 3 to Rs 4 billion on a per annum basis.

They said that the tobacco industry is at crossroads as it is hurting by smuggled brands and illicit cigarettes massively. The illicit cigarettes in the shape of locally manufactured tax-evaded and smuggled cigarettes share will exceed 40.7 billion sticks to 53.4 billion sticks in the next fiscal year while the share of the legit industry will reduce from 42.3 billion sticks in 2022-23 to 29.6 billion sticks in the fiscal year 2023-24.

The company has proposed the government to bring down the FED from Rs 16500 per 1000 sticks to Rs 11550 for tier-1 cigarettes and for tier-II it should be reduced from Rs 5050 to Rs 4000 per 1000 sticks in the finalization of the budget for 2023-24.

They added that there was a 50 percent decline in tax paid tobacco sector but there was no decline in consumption. It was their view that the FBR would face a shortfall in achieving its desired tax collection target from the tobacco sector.

The FBR has envisaged a tax collection target of Rs 240 billion from the tobacco sector after hiking the FED by 200 percent in the outgoing.

The FBR had increased the FED by 154 percent in last February 2023 through mini budget with expectation that it would fetch Rs 60 billion additional taxes.

Now it is estimated that the FBR will be able to collect Rs 175 billion so the tax machinery will face a massive shortfall of Rs 85 billion alone from one major revenue spinner sector in the outgoing fiscal year.

Copyright Business Recorder, 2023

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