Cigarette manufacturing lawmakers and FED

Islamabad: The Federal Government in a move had decided to withdraw the Rs300 per kg adjustable FED on tobacco. Move that has left the taxpaying cigarette manufacturers in a state of shock.

Spear headed by the National Assembly Speaker who belongs to the tobacco growing area of KP and a neighbor to the biggest tax evading cigarette manufacturing companies that are owned by fellow parliamentarians, the committee decided to abolish this adjustable FED of Rs300 per kg.

The Government in Supplementary Budget 2018 introduced this adjustable FED to reduce tax evasion and increase the tax collection from the local cigarette manufacturers who after this move would be bound to declare the tobacco they process in order to manufacture cigarettes.

This adjustable FED is not a burden on farmers, sources suggests and that this is a misconception created by the tax evading cigarette manufacturers. Officials from FBR have also confirmed that this tax is to be paid by the manufacturers only and the new Finance Bill 2018-19 has introduced a provision in the bill that ensures the same. This tax is only applicable when the manufacturer will process the tobacco through Green Leaf Threshing Unit (GLT) to produce cigarettes. With only 10 GLT’s in Pakistan, this was the only way to ensure that all processed tobacco is documented in FBR books and due tax from all manufacturers is received by FBR. The tobacco barons of KP have again proved that the local cigarette manufacturer’s mafia and their pressure can lead to the Government abolishing policies that go against the agenda of the Prime Minister as well, who has laid focus on increasing the tax collection and documenting the economy.

The same tobacco barons played an important role, when through their influence; they halted the raids on non-tax paid cigarettes. The year 2017 saw an unprecedented enforcement on non-tax paid cigarettes that lead to a confiscation of more than 1.62 billion cigarette sticks. In the year 2018, this confiscation reduced down to 645 million and as soon their Government stepped in, this confiscation was reduced to a mere 2.5 million cigarettes. Removal of this adjustable FED of Rs300 per kg on tobacco will lead the sector to once again being undocumented and increase tax evasion. It seems as if the Prime Minister’s dream of increasing taxes will be reduced to ashes by none other than his own team members.