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FTO Urges FBR to Conduct Yearly Analysis of Domestic Tobacco Production

The Federal Tax Ombudsman (FTO) has strongly recommended the Federal Board of Revenue (FBR) to conduct a yearly analysis of cigarette tobacco produced in Pakistan vis-a-vis declared consumption of tobacco by all cigarette manufacturing units.

According to the special report of the FTO on the tobacco sector, the FTO has recommended the FBR to immediately implement Rule 89 especially sub-rules (2) & (3) read SRO 1149 (1) dated 18th September 2018. Non-implementation of this Rule despite the lapse of 03 years is the root of most of the enforcement hazards in the Tobacco/Cigarette sector. This implementation alone would minimize most of the risks currently confronting FBR’s machinery.

The FBR should identify the officers, to be proceeded against, who have deliberately delayed the implementation of Rule 89, SRO 1149 and thus brazenly compromised the interest of revenue and identify Unit officers Tobacco/Cigarette Squads RTO Peshawar, who have miserably failed in implementing law, rules and prescribed procedure.

The FBR should conduct a yearly analysis of cigarette tobacco produced in Pakistan vis-a-vis declared consumption of tobacco by all cigarette manufacturing units, for 2019-20 onwards, so as to gauge the loss of revenue caused by un-accounted for tobacco.

The FBR should strengthen IREN KPK Hub with serious reorganization on professional lines and by assigning exhaustive jurisdiction to all GLTs so as to ensure a uniform pattern of compliance, monitoring, and enforcement. Officers & officials with sectoral know-how, professional competence, and aptitude may be assigned the important task of monitoring & enforcement in this sector.

Tax Policy Wing, IR to conduct a periodic review of this sector so as to plug the newly emerging loopholes in the cigarette/Tobacco sector, FTO maintained. Similar inspections of GLTs which are being assessed at LTOs Islamabad and Karachi are urgently warranted.

The FTO report revealed that the tobacco/cigarette sector is one of the major revenue-earning sectors in Pakistan. During 2020-21 this sector had contributed around Rs. 130 billion in the shape of Duty & Taxes. Notwithstanding this contribution, the said sector is also a known hub of massive evasion of Duty & taxes and illicit trade.

The FTO’s internal analysis also indicated massive tax evasion at the GLTs stage, evident from the simple fact that as per FBR,s findings, there was an alarming gap between Tobacco produced (as per data maintained by Pakistan Tobacco Board) and Tobacco consumed in declared cigarette manufacturing. (as per Tax record).

The preliminary findings of the in-house analysis indicated that lopsided & ineffective monitoring of GLTs on account of neglect, and inefficiency of FBR’s field force was the root cause of continuous maladministration in terms of section 2(3)(i)(d) of the FTO Ordinance.

Therefore, the Federal Tax Ombudsman constituted an Inspection Team comprising Advisor IT (HQ) and Advisor Monitoring (HQ) in the subject “Own Motion Notice case”, in terms of section 17(1) of the FTO, Ordinance, 2000. The inspection team conducted an inspection of the Office of Commissioner Inland Revenue, RTO Peshawar, holding jurisdiction over the monitoring of local cigarette manufacturers and GLTs.

After proper coordination Inspection was conducted and the team visited RTO Peshawar, joined by all the relevant authorities of IRS belonging to RTO Peshawar. During initial & introductory discussions the RTO authorities briefed the inspection team. As the inspection mainly revolved around the reported maladministration of FBR’s field force, reflected through their defective monitoring of GLTs, therefore the specific documents and details were requisitioned, examined, and discussed with the authorities.

Significant areas of inspection were identified so as to ascertain factual position vis-a-vis statutory & regulatory provisions. The resultant analysis is based on detailed discussions held with the tax authorities at the offices under inspection, examination of relevant records during the inspection, and input of concerned tax officers, the FTO office added.

Source: Pro Pakistan

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