ISLAMABAD: Acknowledging that the Federal Board of Revenue (FBR) failed to stop the erosion of revenue collections by two cigarette manufacturers, the National Accountability Bureau (NAB) has forwarded its initial inquiry in this regard to its awareness and prevention cell for a second round of study.

The initial inquiry into Rs33 billion in tax benefits obtained by two multinational cigarette manufacturing companies through a change in the taxation structure was conducted by NAB Rawalpindi.

Investigators had alleged several times during the inquiry that the FBR was not cooperating with them.

While forwarding the case to its awareness and prevention cell, NAB Rawalpindi suggested a second round of study in this regard and that FBR officials may be called to identify reasons leading to the loss of revenue from the cigarette industry.

It has also been suggested to investigate whether relatives of several high-ranking FBR officials were employed by the two companies.

A similar question was asked by the chair of the Senate Special Committee on Causes on Decline in Tax Collection of Tobacco Sector in August 2018, when Senator Kulsoom Parveen said the committee would “also determine the reasons that led FBR to give benefit to the cigarette manufacturers”.

Senator Azam Swati had asked about the names of officials whose children and relatives were employed as executives by the cigarette industry, but their names were not shared in the committee meeting.

The case came to the fore after the Auditor General of Pakistan recommended that the matter be sent to NAB in a Public Accounts Committee (PAC) meeting on May 23.

The PAC was informed that after the introduction of a three-tier taxation structure in May 2017, the two companies had moved their popular brands to the lowest tier and sold their cigarettes with a 50pc reduction in federal excise duty, which increased sales but lowered revenues.

The government has maintained the three-tier system in recent budgetary measures but increased the rate of excise duty on each tier.

Published in Dawn, October 21st, 2018