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Rs60 Billion Tax Evasion By Cigarette Industry, NAB to Probe

ISLAMABAD (Dec 6, 2018) — The National Accountability Bureau Rawalpindi has sent its headquarters details of 60 billion Rupees tax evasion by the cigarette industry for further probe as the magnitude of revenue loss was high (US$461 million @ Rs130 = $1).

Multinational cigarette companies have claimed that they pay almost all taxes collected from the industry, Pakistan Today had reported in September.

Philip Morris Pakistan and Pakistan Tobacco Company (PTC) pay around 98 percent of the total amount of taxes that the government collects from the industry concerned, the report said.

It quoted PTC Senior Corporate Affairs Manager Noor Aftab as saying, “We have about 65pc of the total cigarette market in Pakistan but we contribute 98pc to the [tax] revenue from this industry.”

Earlier in May, the Public Accounts Committee (PAC) had recommended a special audit by the AGP of the significant drop in tax collection from the cigarette industry.

Subsequently, the AGP, in its findings, revealed in July that one of the multinational companies included its popular brands in the lowest tax tier, which led to an increase in its sales but led to 50% reduction in tax payments.

The Federal Board of Revenue (FBR) has not been able to meet its revenue target from the cigarette industry – a major contributor to the national exchequer. There has been a revenue loss of around Rs60 billion over the last three years due to tax evasion by the industry, according to NAB Rawalpindi Board.

The government recently removed six members of the FBR, who were responsible for the revenue loss, from their posts and transferred them to different ministries.

The Senate Special Committee on Tobacco, in a meeting held in November, directed the FBR to submit a report on the relatives of tax officials working in cigarette companies.

Pakistan Peoples Party (PPP) Senator Sherry Rehman said tobacco lobbies were active and “we do not want to become part of any lobby”. “The committee should investigate whether there is a conflict of interest in the FBR while dealing with the tobacco sector,” she added.

The Auditor General of Pakistan (AGP) in its findings revealed that tax collection went down after the introduction of a third slab of federal excise duty on high-end cigarettes.

The federal excise duty on cigarettes came down from Rs33 to Rs16 per pack rather than increasing, while cigarette production increased.

Noor Aftab told PT the third tax tier should not be abolished because it has a positive impact on the legal tobacco industry.

“The continuity of this system will lead to a gradual increase in tax collection over the years,” said Corporate Finance Head Mohammad Waqas Bhatti.






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