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NAB broadens tax probe in tobacco industry

ISLAMABAD: The National Accountability Bureau (NAB) has broadened the scope of investigation into the decline in revenue collection from the tobacco sector and has handed over the matter to its awareness and prevention wing for further inquiry.

Sources told The Express Tribune that the anti-corruption watchdog’s awareness and prevention wing will work along with a focal person from the Federal Board of Revenue (FBR). It will collect relevant data and documents from the FBR to ascertain the facts.

It will send its findings to NAB Rawalpindi after conducting initial inquiry. NAB Rawalpindi would take a final decision on whether to convert the inquiry into a full-fledged investigation or not, the sources said. “The decision of NAB Rawalpindi will depend on findings of the initial inquiry of the awareness and prevention wing,” a source said.

According to the sources, NAB has already asked the FBR to appoint a focal person for assistance in the ongoing investigation into the decrease of billions of rupees in tax collection from the tobacco industry. Taking cognisance of the hefty decrease in tax collection, especially after the introduction of a three-tier tax system in May last year, the Public Accounts Committee (PAC) and standing committees on finance and health had earlier taken up the issue and discussed in detail the pros and cons of the three-tier tax structure.

The revised structure caused a massive decline of Rs33 billion in revenue collection from the tobacco sector – which is a major contributor to the national exchequer.

Similarly, PAC, on May 23, 2018, recommended a special audit by the Auditor General of Pakistan (AGP) of the significant drop in tax collection. The AGP revealed that one of the multinational companies included its popular brands in the lowest tax tier, which led to increase in sales and 50% reduction in taxes.

According to sources, think tanks, NGOs and the health ministry have written letters to the finance minister and asked for the revival of the old tax system for cigarettes in the country. Due to the introduction of the third tax slab, the federal excise duty was reduced from Rs33 to Rs16 per pack of cigarettes, which resulted in an increase in the production of cigarettes, they said.

Similarly, the turnover of cigarette manufacturing companies increased by up to 118% while the FBR could collect only Rs87 billion in taxes against the target of Rs120 billion.