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Senate panel asks FBR to revisit duty on tobacco for increasing exports

ISLAMABAD: The Senate Special Committee on Tobacco on Tuesday asked the Federal Board of Revenue (FBR) to revise the Statutory Regulatory Order (SRO) 1149 in order to encourage tobacco exports.

The meeting was headed by Senator Kalsoom Parveen who directed the FBR to revisit the said SRO and its clauses that has imposed Rs300 federal duty per kilogram on raw tobacco.

The committee was informed by member Senator Dilawar Khan that the price of per kg raw tobacco was around Rs180 but the SRO 1149 of 2018 had imposed Rs300 duty on it adding that that the multinationals could export green leaf threshing, whereas local manufacturers were unable to export the same.

“The issue is that growers cannot export tobacco, they sell it to traders who get it processed and sell it to the local cigarette manufacturers or export it,” Senator Khan added. He said that the SRO must be revisited as this has discouraged exports of around $300 million from the sector.

The committee also discussed the issue of allegedly illegal cigarette exports from Azad Jammu and Kashmir.

The claim, however, was refuted by Ashfaq-ur-Rehman, was representing AJK’s tobacco sector at the meeting, who informed the members that the region’s tobacco producers were tax-paying businesses adding that, “the impression given by the committee that we are tax evaders is incorrect.”

Subsequent to his clarification, Ms Parveen apologised for calling AJK’s tobacco sector tax evaders and said that this impression was given by officials in their briefing to the committee.

The Senate Special Committee was formed after losses worth Rs60-70 billion in revenue collections were detected from the tobacco sector despite multinational producers registering 60 per cent growth in their bottom-line profits.

Moreover, Ms Parveen also showed her displeasure at the decline in revenue collections from the tobacco sector in 2016-17.

She said that this has not caused any losses to multi-nationals as they still procure 60pc profits. However, local companies have been penalised as they are being charged an added tax of Rs300. She added that procuring taxes in advance was a good move but warned that it would affect local manufacturers adversely.

The officials of the FBR were rendered speechless in the committee meeting when asked about the causes of decline in tax collection as the figures of tax collecting body failed to match with the details provided by the tobacco sector.

She lamented that, “we are begging for few billion rupees world over and failing to tap the local resources. It all happened after the introduction of three-tier system as the two multinational companies shifted their products from second tier to third tier and saved billions of rupees.”

The committee also asked the Chairman FBR and his team whether any inquiry had been conducted in to the allegations of employments and benefits given to the former senior FBR officials by the tobacco companies.

Senator Parveen said that she would arrange another sitting with the FBR to review this issue in detail and match the figures.

The committee was then informed that the revenue collection target on the tobacco sector was Rs115bn for the current year and it would be Rs150bn for the next fiscal year.

The meeting was also attended by senators Maulana Abdul Ghafoor Haideri, Azam Khan Swati, Hidayatullah, Dilawar Khan and senior officials from the Ministry of Commerce, FBR and Pakistan Tobacco Board.