ISLAMABAD: An independent study has uncovered substantial regulatory loopholes in the Federal Board of Revenue (FBR) track and trace system’s compliance to collect actual tax revenue from four sectors: cement, cigarettes, fertilizer and sugar.

A roundtable discussion was held on Thursday to examine the findings of the Institute of Public Opinion and Research (IPOR) study on the Track and Trace System (TTS) compliance levels. IPOR held the event in collaboration with Pildat which was attended by Minister of State for Finance Ali Pervaiz Malik and other government officials.

Efforts to implement the TTS in the tobacco sector started in 2021 along with three other sectors - cement, fertilizer and sugar. Since July 2022, selling a cigarette pack without a track and trace stamp is illegal. However, since the deadline, track and trace compliance remains a distant dream.

CEO of IPORTariq Junaid gave a presentation on the key findings from the study. IPOR conducted a market research study in 11 cities across Punjab and Sindh covering 40 retail outlets in 18 markets covering a total of 720 outlets. The focus of the study was twofold: ascertaining level of TTS compliance at point of sale and measuring compliance of the minimum legal price (MLP) for cigarettes which is mandated by the FBR.

According to the report, out of 264 cigarette brands surveyed, only 19 fully adhered to the TTS regime requirements which mandate the use of the track and trace stamps. Non-compliant brands accounted for 58pc of the market, comprising locally manufactured duty-not-paid (DNP) brands (65pc) and smuggled brands (35pc) with violations ranging from missing TTS stamps to non-adherence to pricing or health warning regulations.

Furthermore, 197 brands were found to be selling below the minimum legal price whereas 48 brands selling above the MLP were non-compliant to the stipulated legal requirements. And 19 brands were found to be compliant to all stipulated legal requirements and selling above the MLP.

The roundtable provided a platform for stakeholders to engage in discussions about the challenges facing the TTS system, its enforcement at the retail level, and the overall impact of non-compliance on the FBR’s tax collection and public health efforts.

Project Director for the TTS at FBR Mohammad Zaheer Qureshi outlined the current state of compliance enforcement and emphasised the importance of robust tracking mechanisms to deter tax evasion.

He highlighted the challenges faced in implementing the TTS, including issues of industry compliance and technological adaptation, and shared insights into how the FBR was tackling these obstacles through enhanced regulatory oversight.

Minister Pervaiz Malik shared his perspective on the government’s commitment to ensuring compliance within the entire sector, stressing that enhanced regulatory measures were needed to achieve TTS goals.

He highlighted the ongoing digitisation process and the importance of integrating technology to improve efficiency. He said economic stability was a collective effort, requiring collaboration across all sectors.

Mr Malik underscored the need to raise awareness about these challenges to build a more resilient and stable economy.

It was proposed to FBR to strengthen enforcement at retail levels to curb access to non-compliant brands, increasing penalties for violations and launch public awareness campaigns to educate consumers on the significance of purchasing compliant products.

Published in Dawn, November 15th, 2024