AGP, FBR at odds over explaining revenue from tobacco sector

Officials explain tax collection during Senate panel hearing

ISLAMABAD: A special committee of the Senate met on Thursday to look into the decline in tax collection from the tobacco industry.

Chairing the meeting, Senator Kulsoom Parveen questioned the Federal Board of Revenue’s (FBR) tax officer who had earlier claimed that revenue collection from the sector was higher. In response, Auditor General of Pakistan (AGP) Javaid Jehangir said they stand by their revenue numbers, which were collected from the data of FBR.

“It is the incompetence of FBR and it seems it was sleeping while the revenue of companies kept increasing from billions to trillions,” she said, lamenting that it was a sorry state of affairs that there was a decline in tax collection.



The AGP said the introduction of a third-tier tax system revealed that sales of tobacco companies jumped 31.64% in fiscal year 2017-18 compared to the previous year. However, there has not been any corresponding effect on tax collection, which increased by a mere 4.5%.

During the meeting, AGP Jehangir and FBR Sales Tax Chief Rana Zulfiqar were at odds over tax collection figures. The Senate’s special committee is investigating causes behind the decline in tax collection from the tobacco sector. The committee was taken aback at the lacklustre behaviour of the FBR and Pakistan Tobacco Board (PTB) for being quiet on information and coming without any preparation.

The FBR in its ongoing fiscal year has retained the third-tier and set aside stakeholder recommendations calling for the restoration of a two-tier tax system. The AGP rebutted the FBR’s claims of high tax collection. This struck a chord in the committee inviting ire of the lawmakers.

An anti-tobacco campaign lawyer Malik Imran stated that 98% of the revenue in tobacco sector was being generated by only two major companies. “It was due to manipulation that the FBR has no data of tax collection; rather it is only provided by these companies,” he said.



He further added that Pakistan was a signatory to the World Health Organization’s (WHO) Framework Convention on Tobacco Control (FCTC) that binds the government to increase taxes in order to reduce consumption in the country, besides taking other measures.

Senator Azam Swati said it was a one-sided story what the FBR was sharing and that such acts were not possible without involvement of local customs officials. The PTB chairperson also failed to give a complete picture for the decline in tax collection.

Published in The Express Tribune, August 10^th, 2018.

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