ISLAMABAD: A Senate special committee on Wednesday said the country needs urgent measures to increase tax collection and directed the Federal Board of Revenue (FBR) to explain why it introduced a third tier of federal excise duty on cigarettes within 10 days.

“All doors open towards the FBR and the worst part is that the country has started to face a drop in revenues but multinational companies are making enormous profits,” Senator Kulsoom Parveen, the chairperson of the Special Committee on Causes of Decline in Tax Collection of Tobacco Sector, said at the meeting.

Other senators endorsed her point of view and decried the new taxation system, calling it legal tax evasion by the companies.

“We are trying to get tax evaders and striving to recover unpaid government money, but if the companies start to bag money that belongs to the country it is unfair,” Senator Azam Swati added.

He criticised the FBR as well as multinational cigarette companies, who he claimed were approaching him through his son.

“This is the forum. If anybody wants to discuss anything with me, I am available,” he said.

During a briefing from the Pakistan Tobacco Board (PTB), the senators were informed that around 60pc of tobacco is grown in Khyber Pakhtunkhwa. There are 26 cigarette manufacturing companies in the country, and 10 green leaf threshers process tobacco for use by the cigarette industry.

The PTB also told them there were no unregistered green leaf threshers in the country and four from the Bara area in Khyber Agency are being registered with the FBR following the merger of KP with the former Federally Administered Tribal Areas.

The briefing triggered a new wave of arguments, as the senators questioned the FBR’s performance in not monitoring the threshers.

“Instead of getting us into an unending discussion, why did the FBR not start monitoring GLTs last year to have a clear idea which cigarette manufacturers were buying processed tobacco,” Senator Dr Ashok Kumar said.

FBR member Dr Mohammad Iqbal told the committee the board was planning to supervise green leaf threshers but needs regulatory powers to do so.

“There are some green leaf threshers that are owned by cigarette manufacturers and there is no federal excise duty over them. We are looking to implement federal excise duty on them too,” Dr Iqbal said, but did not offer to name the units that had their own threshers.

As the discussion on the decline in tax collection from federal excise duty on cigarettes resumed, even FBR officials acknowledged that there is tax theft by the cigarette industry.

The committee meeting was also briefed by representatives of two multinational cigarette manufacturers who claimed the three-tier taxation system would eventually help increase federal excise duty collection.

Health Secretary Zahid Saeed and representatives of health sector NGOs argued otherwise, while representatives from the Pakistan National Hearts Association and Society for the Protection of the Rights of the Childsaid that cigarettes have become cheaper due to the three-tier system, increasing their sales and leading to greater health risks for Pakistanis.

Published in Dawn, September 13th, 2018