Senate body irked over tobacco revenue cut

Members blame FBR for not taxing sector despite revenue growth of billions


Abbas Shahid


A Senate body on Wednesday expressed its annoyance over the drop in revenue from the taxation of tobacco corporations on the third-tier slab of cigarettes.

The meeting of the Senate Special Committee on Causes of Decline in Tax Collection from Tobacco Sector was held with Senator Kalsoom Parveen in the chair.

Briefing the committee, the Federal Board of Revenue (FBR) chief said that the main objective of the tax cut was to include more people in the tax net, adding that action was being taken against the unlawful sale of smuggled cigarettes.

The tax body chief apprised the Senate body that all recommendations on the matter were being deliberated upon and the bureau had prepared a summary approving the review of taxes levied on the ‘big tobacco corporations’.

However, the members of the body were irked with the FBR’s performance and made no effort to sugar-coat it, with a consensus being developed within the meeting that the issue was solely a failure of the FBR to control taxation.

Senator Parveen said that FBR’s failure was particularly visible from the amounts that were being received from the tobacco sector. “The tax, previously Rs120 billion, has now been limited to just Rs70 billion. How is this possible at a time when the industry is posting profits of considerable scales and sales are boosting,” she asked.

Talking statistics, she said that the sectors profits had skyrocketed since 2015. “And yet, FBR’s calculated revenue from the sales back then, was Rs114 billion which has now dwindled to Rs88 billion. Who else is to blame but the department itself?” she said.

A previous meeting of the committee last month had determined that the fault lied with not the FBR but the sale of non-custom paid smuggled cigarettes. These sales had eaten up both the revenues of FBR and the local tobacco industry.

The board also stuck to the point, stating that sales of multi-national tobacco corporations had slumped in 2016 from 56 billion sticks to a measly 30 billion, all thanks to the smuggled cigarettes.

However, members of the committee were irked by the briefing from the FBR and said tax collection was the backbone of the economy but the tax collecting body seemed to be ignoring the ground realities in the country.

“It is not a matter of one or two billion rupees. Just look at the huge decline in tax collection from this sector. This has to be taken seriously,” Senator Azam Khan Swati had said.