ISLAMABAD: A Senate committee on Thursday decried the continuation of the third tier taxation on tobacco products and asked the Federal Board of Revenue (FBR) to explain the reasons for the drop in revenue generations from cigarettes while the sale was increasing.

At a meeting, the members of the Senate Special Committee on Causes on Decline in Tax Collection of Tobacco Sector said smoking was on the rise while tax collection from the sector was declining.

Chairperson of the committee Senator Kulsoom Parveen asked about the reasons for the decline in revenue collections. She asked officials of the FBR to explain the causes.

Tax on cigarettes declined from Rs111bn in 2015-16 to Rs88bn in 2017-18, officials say

“Has FBR failed to collect revenues despite introducing the third tier for tax collection on cigarettes?”

Senator Parveen added: “The committee will also determine the reasons that led the FBR to introduce the third tier taxation on cigarettes.”

The meeting was informed that the tax on cigarettes had declined from Rs111 billion in 2015-16 to Rs88 billion in 2017-18 due to high sale of non-customs paid cigarettes.

The sale of multinational companies declined in 2016 to Rs30 billion cigarette sticks against 56 billion sticks in the previous year.

However, members of the committee were irked by the briefing from the FBR and said tax collection was the backbone of the economy but the tax collecting body seemed to be ignoring the ground realities in the country.

“It is not a matter of one or two billion rupees. Just look at the huge decline in tax collection from this sector. This has to be taken seriously,” Senator Azam Khan Swati added.

The committee members criticised the FBR for the continuation of the third tier taxation on cigarettes.

Senator Dr Ashok Kumar asked about the details of raids and other actions taken by the FBR against tax thefts by the cigarette companies.

Senator Swati said: “The Public Accounts Committee (PAC) after listening to all sides and all stakeholders had recommended that the third tier system of taxation should be abolished. Now I want to know why the FBR has failed to abolish this system on cigarettes,” he added.

The committee directed the FBR to present details of five years tax collected from the tobacco sector in the next meeting.

Published in Dawn, August 10th, 2018