The double standard in our war on tax evasion

The Federal Board of Revenue has drawn a line in the sand. From this month, every tobacco manufacturing unit and Green Leaf Threshing facility in Pakistan must install IP-based CCTV cameras for 24/7 real-time monitoring of production. It is a bold move against tax evasion. But it raises an uncomfortable question that no policy document has yet answered: why is the government demanding from private industry a standard of surveillance it has failed to apply to its own warehouses?

Pakistan’s Track and Trace System, launched in 2021, was designed to be the silver bullet against illicit trade. By stamping every legitimate cigarette pack and monitoring production digitally, the system promised to secure billions in lost revenue. Officials point to the system’s expansion into sugar, cement, tiles and textiles as proof of progress. Sugar is expected to contribute an extra Rs 76 billion this year, cement another Rs 102 billion. Tobacco was meant to be the proof of concept. The reality is messier than the official narrative suggests.

The FBR itself has acknowledged large-scale tax evasion in the tobacco sector, with an estimated Rs 80 billion lost annually due to illegal activity at the Green Leaf Threshing stage. The system’s own chairman has publicly quantified this massive leakage, underscoring that despite technological investment, evasion persists.

The core issue is not the technology. It is the asymmetry of accountability.

Recently, a Senate sub-committee examined the disappearance of 2,828 cartons of confiscated cigarettes, valued at approximately Rs 250 million, from FBR storage facilities in Swabi and Mardan. The details are damning. A decision was made to transfer them. The destination warehouse was not equipped with cameras. No one checked on them for sixteen months. An FIR was finally filed in May 2025. Three officers were dismissed and eight others transferred. But crucially, despite the introduction of revised standard operating procedures, another 20 cartons were allegedly stolen in January 2026.

Here is the paradox the FBR must answer. Private factories are now legally bound to install 24/7 cameras monitored in real time. But government godowns where seized evidence is stored operated without such coverage. The very institution tasked with enforcing compliance failed to comply with the most basic principle of custodial security.

This is not an isolated lapse. It reflects a systemic gap between policy intent and institutional capacity. The FBR chairman has publicly estimated that the tobacco sector alone suffers Rs 80 billion in annual losses due to illegal activity at the Green Leaf Threshing stage. Pakistan missed its IMF revenue target by Rs 330 billion in the first half of this fiscal year. The usual explanations like economic slowdown do not tell the full story. Weak enforcement does.

For Track and Trace to work, three shifts are non-negotiable.

First, surveillance must be reciprocal. The same CCTV mandate applied to private manufacturers must extend to every government warehouse holding seized excisable goods. If real-time monitoring is essential for preventing evasion in production, it is equally essential for preventing theft in custody. The FBR should publish by March 2026 a complete audit of surveillance coverage across all its storage facilities.

Second, enforcement must move beyond the factory gate. The FBR has already authorized provincial officers to seize cigarettes without tax stamps anywhere in the country. But this authority must translate into action. Provincial authorities who hold enforcement powers at retail must be brought into a coordinated national framework. Without checks at the point of sale, production monitoring alone cannot secure revenue.

Third, the system’s expansion must be grounded in honest evaluation. The FBR is now extending TTS to tiles, textiles, pharmaceuticals, and food products. This is welcome. The tile sector alone accounts for an estimated Rs 30 billion in annual tax losses. But expansion without addressing the compliance gaps documented in the tobacco pilot risks replicating failure at larger scale. The government should hold off on celebrating and instead call for an independent audit. Match what factories produce with what reaches retail shelves across every TTS sector. The answers will speak for themselves.

Technology has limits. It cannot fix a system where the state watches private companies closely but refuses to watch itself. When warehouses operate in the dark while factories face 24/7 cameras, the message to evaders is simple: enforcement is optional.

The FBR’s CCTV mandate is a step forward. But until the same cameras watch over government godowns, until compliance data matches policy intent, and until enforcement reaches the retail shelf, Pakistan’s war on tax evasion will remain a battle fought with one eye closed. The question is not whether the technology works. It is whether we have the integrity to apply it equally to ourselves.

Copyright Business Recorder, 2026