Proposal to raise FED from Rs10 to Rs500 rejected

ISLAMABAD: The Federal Board of Revenue (FBR) informed the Special Committee of the National Assembly on Agricultural Products Tuesday that advance Federal Excise Duty (FED) on tobacco leaf will remain intact for the fiscal year 2020-21 at Rs10.

Considering the risk and tax burden of advance FED being passed on to tobacco growers, the FBR discarded the proposal to increase advance FED from Rs10 to Rs500. The FBR submitted this information in a meeting chaired by the Speaker National Assembly Asad Qaiser who heads the Special Committee on Agricultural Products.

The panel was informed that FBR consulted all the stakeholders on a proposal from the private sector for the fully adjustable tax to be increased from Rs10 to Rs500 to indirectly create more revenue for the government. However, after seeing all the evidence, and potential negative impacts on the farmers, the FBR decided that the current regime for advance FED on tobacco leaf will remain unaltered.

Asad Qaiser recommended a proposal for additional taxes on cigarettes meant for supporting government financing amidst COIVD-19. Secondly, he said the FBR should increase tax on cigarettes and imported tobacco as Pakistan was a signatory to the WHO Framework Convention on Tobacco Control (FCTC). He recommended that FBR should strengthen its enforcement mechanism to prevent tax evasion and smuggling. He requested the FBR not to ignore subsistence farmers in stakeholders’ consultation processes.

He said that good policy dictates to tax the end product in the value chain and for that matter the burden of taxation should be shifted to the end consumer of cigarettes.

The tobacco growers informed the panel that tobacco crop is the livelihood of more than 35,000 households and previous tax policies though intended for the industry badly dented the interest of the farmers through reduced competition and suppressed prices.