The Special Committee has rejected the briefing of Federal Board of Revenue (FBR) on a matter pertaining to decline of Rs 60 billion revenue from tobacco sector, as the committee expressed total dissatisfaction over explanation given by the tax authorities.
Senator Kulsoom Parveen, chairperson of the Special Committee formed on causes of decline in tax collection of tobacco sector, said, "I am not satisfied with the FBR briefing and have serious reservations and will look into the matter again."
The committee also wanted the FBR to revisit the SRO 1149 (1)/2018 after Pakistan Tobacco Board stated that it would lead to decline in export of tobacco.
The chairman Federal Board of Revenue (FBR) informed the committee that 66 percent people are doing legitimate business in tobacco sector and they are paying 98 percent tax and the rest 34 percent are paying just 2 percent tax.
The chairman also stated that legitimate industry (multinational companies) production has been
declined which also led to decline in tax collection from the sector.
The Member Policy FBR informed the committee that department is collecting four types of taxes including Federal Excise Duty (FED), Sales tax, Income Tax and Regulatory Duty (RD) from this sector.
He further told the committee that though cigarette production of multinational companies has been declining, their profit has been increasing.
The chairperson of committee asked the chairman FBR that there is contradiction in the statement of the FBR and the companies, as the representatives of companies have submitted to the committee that their profit increased by 60 percent in the fiscal year 2016-17 and "you are telling that their production has been declined."
The FBR officials also stated that revenue of Rs 115 billion is expected from tobacco sector with Rs 111 billion from Pakistan Tobacco Company and Philip and Morris International while Rs 4 billion would be collected from other companies.
Senator Azam Swati said that weak enforcement of law is creating problems, adding, "If you catch two or three big fish, I can assure you matter can be solved easily."
The representatives of Pakistan Tobacco Board informed the committee that there are 75,000 tobacco growers all over Pakistan and out of these more than 45,000 growers are located in KP producing 95 percent of Flue Cured Virginia over an area of 25,500 hectares in the five districts of KP.
The sector is also one of the main contributors to the government exchequer and provided Rs 88 billion in FED/Sales tax in 2017-18.
Senator Dilawar Khan was of the view that there is a dire need to revisit SRO 1149 (1)/2018 as multinationals companies can export
GLT but local manufacturers cannot. This SRO is revisited as this has discouraged exports.