ISLAMABAD: The Public Accounts Committee (PAC) has directed the Auditor General of Pakistan (AGP) to initiate a special audit of multinational cigarette companies following allegations of multi-billion rupees revenue loss due to slackness of the Federal Board of Revenue (FBR).

The special audit has been ordered after the FBR ignored a PAC recommendation to withdraw the third-slab of Federal Excise Duty (FED) on cigarettes in the budget 2018-19.

PAC Chairman Syed Khursheed Shah noted the introduction of third-slab of FED on cigarettes had caused Rs30bn revenue loss to the national exchequer.

The PAC observed that the FBR had been major cause of cheaper cigarettes and multinational companies were its beneficiaries. The board collected Rs107bn in 2014, Rs114bn in 2015 and Rs84bn in 2016 from the industry.

The revenue was expected to reach Rs92bn in 2017 and Mr Shah said the smuggling of cigarettes was also rampant in 2014 and it was still unbridled.

The AGP has been directed to initiate an special audit relating to tax being paid by multinational cigarette companies and the audit teams will collect record to know actual production in the country.

Meanwhile, Adeel Javed, spokesperson of the AGP, told media that the auditor general of Pakistan had been directed to initiate thorough audit of cigarette companies and the auditors will also focus on tax evasion by these companies.

The FBR had retained third slab of federal excise duty (FED) on cigarette price but it invited ire from the parliamentary bodies including the PAC, Senate Standing Committee on National Health Services as well as the National Assembly Standing Committee on Finance had recommended against the three-tier slab.

According to Finance Bill 2018-19, the FED has been raised by 6pc for tier 1 and tier 2, which will have an impact of Rs4.48 and Rs2.00 per pack, respectively, while on the third-tier it is increased by Rs0.96 per pack.

Published in Dawn, May 8th, 2018