ISLAMABAD: The Senate Special Committee on Causes of Decline in Tax Collection of Tobacco Sector on Tuesday directed Chairman Federal Board of Revenue (FBR) Jehanzeb Khan to submit details on employees whose relatives are employed by multinational cigarette manufacturers.

The direction is in line with the ongoing probe into the multi-billion tax evasion scam in tobacco sector. The FBR representatives present at the meeting acknowledged the request but did not disclose names despite committee’s request for details.

The officials ensured the committee that the FBR will provide details in writing. The committee advised the representatives to submit the response in a week.

Senator Azam Swati said that it is time to act against multinationals and local tobacco manufacturers, both of whom, he said, are equally responsible for evasion. Senator Dilawar Khan also accused multinational companies of gifting vehicles and cash to FBR officials.

State Minister for Revenue Hammad Azhar clarified to Dawn that these vehicles were provided for enforcement purposes and said that he has taken steps to discourage this practice.

He also defended the introduction of three-tier tax system for tobacco sector and hoped it will reduce illicit trade of cigarettes in the country.

FBR officials informed the committee that revenue collection edged up to Rs88.54 billion in 2017-18 from Rs74.107bn over the previous year. However, against the collections during 2015-16 at Rs111bn, the numbers have dropped significantly.

Tax officials also informed the committee that the dip in revenue was not attributable to the introduction of the three-tier system but claimed that collection from the sector is expected to reach Rs115bn in the current fiscal year following the 28 per cent growth during the first quarter.

Mentioning the steps to stop illicit trade of tobacco in the country, officials informed the committee that check posts will be established on routes from Azad Jammu and Kashmir to stop the movement of non-duty paid cigarettes.

The government in the revised finance bill increased the excised duty rate in the three tiers. Similarly, the excise duty rates on unmanufactured tobacco were also enhanced to Rs300 per kg from Rs10.

Protesting the move, representatives from multinational companies urged the committee to ensure an equitable environment for business in the tobacco sector. They said that despite contributing 98pc to the sector’s total tax contribution, the companies were penalised.

Published in Dawn, November 7th, 2018