Industry expert lauds govt measures to curb tax evasion in tobacco sector

KARACHI: The tobacco industry experts have commended the government’s efforts to eradicate the smuggling and illegal sale of cigarettes through the installation and implementation of a technology-based Track and Trace system at cigarette manufacturing units, a statement said.

The decision will help the government to achieve tax collection targets from the tobacco sector, it added.

Osama Siddiqui, a macroeconomist analyst, appreciated the government and the Federal Board of Revenue’s (FBR) efforts to install and implement a track and trace system aimed to enhance the government’s revenue by curbing tax evasion and illicit trade.

However, until and unless the system is implemented across the board, it will not help counter the massive tax evasion in the sector which amounts to Rs80 billion/annum, he added.

According to details, Prime Minister Shehbaz Sharif chaired a high-level meeting to stamp out the smuggling of tobacco and to discourage the tendency of tax evasion and to increase its revenue targets.

During the meeting, Sharif stressed on bringing the tax evaders to face the law and observed that the tax collection system could be improved with the use of the latest technology and better enforcement.

It is pertinent to mention that only a few tobacco companies including two multinationals and one national companies have installed the track and trace system, while most of the tobacco companies have not yet installed the system.

The majority of the companies involved in the illicit trade of cigarettes are based in Azad Jammu and Kashmir (AJK) and Khyber Pakhtunkhwa (KP), selling tax-evaded cigarettes across Pakistan.

Siddiqui was of the view that the fiscal stamps mechanism through the Track and Trace system will be a game changer to counter such malpractices.

The system is also one of the major requirements from the International Monetary Fund (IMF) and World Bank (WB), he said, adding that the WB has also given a loan to the government for a project called “Pakistan Raises Revenue” to a sustainable increase in national revenues by broadening the tax base and combating tax evasion.

He urged the government to bring all illegal cigarette manufacturing companies under digital surveillance to increase the government’s revenue.

The success of the trace and track system requires that laws and policies related to the tobacco industry be applied uniformly throughout the industry, he Siddiqui concluded.

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