PM directs swift action against tax defaulters, evaders

ISLAMABAD: Prime Minister Muhammad Shehbaz Sharif on Monday directed initiation of action against tax defaulters and evaders on emergency basis.

The prime minister directed for constitution of a committee to identify the hurdles and responsibilities in the track and trace system. He said that all the legal impediments in the enforcement of track and trace system should be removed. The committee would identify the hurdles and people involved in tax theft within seven days. The prime minister chaired a meeting regarding implementation of Track and Trace System in Islamabad, PM Office Media Wing said in a press release.

The committee would be tasked to submit future proposals over enforcement of automatic tax system in factories and industries.

The meeting was attended by federal ministers including Muhammad Aurangzeb, Ahad Khan Cheema, Deputy Chairman Planning Commission Jehanzaib Khan, Chairman FBR Malik Amjad Zubair Tiwana and other senior officials.

The prime minister questioned as to why the system was still inactive? He observe that this system should have been made functional in tobacco, sugar, cement and fertilizer industries in the last two years, adding that the system should be placed in other important sectors of the economy.

He further directed that all those factories that resisted the implementation of track and trace system should be immediately sealed. He opined that besides revenues, the said system could also be utilized for counterfeit and substandard products.

The prime minister asked for end to fake and unregistered cigarettes and their destruction. The country was facing economic issues and mafia with their connivance had been inflicting damages to the national kitty, he added. The prime minister also asked for seeking help of the international institutions in the track and trace system.

The meeting was apprised in detail about the hurdles in the automated enactment of the track and trace system in the cement, sugar, fertilizer and tobacco sectors. The meeting was told that in 14 tobacco factories, the system was fully functional whereas 12 others had been sealed for non-compliance.

The system was fully functional in fertilizer industry while it was facing problems in sugar and cement factories due to some technical issues which were being addressed.

The meeting was further apprised that raids were being conducted on godowns throughout the country to control the smuggling. The prime minister directed that the law enforcement agencies should assist FBR.

Despite the prime minister’s crystal-clear instructions for implementing the Track and Trace System (TTS) to plug leakages in the major revenue spinner sectors, the FBR has failed to enforce the TTS effectively to curb rampant tax evasion.

Some credible information showed that out of a total of 100 brands only 26 brands of cigarettes were found to have tax stamps fixed on them whereas other brands were being openly sold in the market without stamps. A couple of local brands were also found to have tax stamps, however, the same brands were also being sold without any stamps. Such blatant violation of the law is occurring at a time when over 18 months have passed since the Track & Trace System (TTS) was to be implemented for the tobacco sector.

Despite a lapse of over 18 months, TTS in Pakistan has not been able to achieve its objective of curbing illicit trade in the tobacco sector. To date, only two cigarette manufacturers have implemented TTS whereas implementation at other factories remains elusive. Approximately 98pc of the tax is being paid by these two legitimate manufacturers whereas the companies with over 50pc market share are only contributing 2pc of the total revenue. Despite the hype and positioning of TTS as the ideal solution to curb illicit trade, the incidence of illicit trade has increased drastically and cigarette packs without stamps are being openly sold in the market.

It is important to highlight that the implementation of TTS in Pakistan was a “structural benchmark” set by the IMF and it seems that the government has only implemented it to tick the box rather than ensuring its implementation in letter and spirit.

According to estimates, the illicit cigarette share stands at over 60pc whereas the legitimate industry has shrunk to less than 40pc. The decline in volume of the legitimate industry indicates a loss of over Rs300 billion to the national exchequer due to the illicit cigarette trade.

The TTS generates tonnes of data related to manufacturing and production. There seems to be no data analysis and no utilization of the data being collected by the TTS, neither at the manufacturing stage nor further down in the supply chain. TTS is a tool to facilitate enforcement. Until and unless this is coupled with effective enforcement across the board, including at the retail level, it will not yield the desired results. Over 100 million tax-evaded cigarette sticks are being sold daily and the seizures by law enforcement agencies are negligible and do not dent the overall illicit trade.

Meanwhile, Ambassador of Germany Alfred Grannas called on Prime Minister Muhammad Shehbaz Sharif on Monday and discussed matters of mutual interest. The prime minister emphasized that Pakistan deeply valued its longstanding ties with Germany and considered it an important partner in Europe, expressing the desire to expand existing level of bilateral trade and investment, stating that there was great potential for enhanced German investments in Pakistan.

He also extended an invitation to the German Chancellor to undertake an official visit to Pakistan at his earliest convenience. The ambassador assured the prime minister that Germany was keen to work closely with Pakistan to strengthen bilateral ties, especially in trade and investment.

Meanwhile, Punjab Assembly Speaker Malik Muhammad Ahmad Khan Monday called on Prime Minister Shehbaz Sharif and discussed matters of mutual concern.