Excise department re-imposes cinema tax in Punjab

Published: January 11, 2020
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Representational image. PHOTO: REUTERS

Representational image. PHOTO: REUTERS

LAHORE: The collection of entertainment duty from cinemas in Punjab has intensified the tug of war between the Excise and Taxation Department and owners of cinema houses.

Employing influence and power, the cinema owners are seeking exemption from the entertainment duty for a few more years.

The excise department has, however, insisted that no concession will be granted under any condition but considering the situation of the cinema industry, a reduction in the entertainment duty can be deliberated upon.

Describing the objections raised by the cinema owners as legitimate, the excise department has decided to develop a software, in collaboration with the Punjab Information Technology Board (PITB), which will allow the monitoring of ticket sales at the cinemas.

Punjab considering another tax break for cinema owners

Once the software is launched, the department will be able to evaluate the tax electronically and will no longer be required to depute excise staff in the cinemas.

There are nearly 75 cinemas with over 105 screens across Punjab. The cost of tickets in the state-of-the-art and deluxe cinema theatres in Lahore and other big cities ranges from Rs500 to Rs1,300 per person. However, through political influence, the cinema owners have been dodging the entertainment duty for the past 19 years.

Cinema owners particularly enjoyed a lot of concessions during the tenure of the Pakistan Muslim League-Nawaz (PML-N) government and despite strong opposition from the excise department, former Punjab chief minister Mian Shehbaz Sharif exempted the cinemas from the entertainment duty.

From 2001 to 2005, the Punjab government had imposed a 65% tax on the total cost of cinema tickets. However, the cinema owners resorted to various delaying tactics and got stay orders from court to avoid the tax.

From 2006 to 2010, the government exempted the cinemas from tax payment because of the poor financial condition of the film industry. The excise department tried to collect the tax in 2010 but to no avail.

In 2011, the department – after amending the tax schedule – reduced the tax ratio from 65% to 20%. However, the government once again exempted the cinemas from taxes. The last tax relief for the cinemas ended on December 31, 2019.

With the start of the new year, the representative body of cinema owners is once again presenting their bad financial condition as an excuse and is trying to win tax exemption for a few more years.

Nonetheless, a majority in the Pakistan Tehreek-e-Insaf (PTI) government believes that since there are state-of-the-art cinema theatres selling tickets at high prices, it would be inappropriate to completely exempt them from taxes.

The Excise and Taxation Department also argued before the government that the grant of tax exemptions to the cinemas for a few more years made no sense at all.

Speaking to The Express Tribune, cinema owners’ body Chairman Zoraiz Lashari said like other sectors, the cinema industry had also been impacted by the prevalent economic conditions.

“Many screens have shut down and now we have a very limited audience who comes to watch movies. Hence, we have requested the government to exempt us from taxes for a few more years,” Lashari said.

Punjab cinema owners face 65% tax levy

“Moreover, we have also asked the excise department to impose taxes on us in line with the number of seats in the cinema theatres and as per average of the tickets sold. We have also requested them to reduce the tax ratio from 20% to 5%. Importantly, the excise staff should not be deputed in cinemas,” he added.

When contacted, Excise and Taxation Punjab Director-General Sohail Shehzad said the stance of the department regarding the matter was very clear.

“There should be no more tax exemption and the collection of entertainment duty from the cinemas should resume,” he said. “We are deliberating the recommendations put forward by the cinema owners to reduce the tax ratio from 20% to 5% and the collection of tax in accordance with the average number of seats in the theatres.”

Published in The Express Tribune, January 11th, 2020.

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