Pakistan Low FED Collection: FBR Probing Tax Record of Two Cigarette Giants

Source from:  Business Recorder 12/04/2013

The Federal Board of Revenue is minutely probing tax record of two multinational cigarette companies for not fulfilling the commitment made in budget (2013-14) for achieving 20 percent growth in FED collection during the current fiscal year. Sources told Business Recorder here on Tuesday that the FBR has assigned the task to the concerned tax department/agency for thoroughly investigating data of first quarter (July-September) 2013-14 of both the companies to ascertain the reasons for low collection.

The two cigarettes giants have committed with the FBR to show at least 20 percent increase in FED collection following introduction of new FED slabs for different brands of cigarettes. Through Finance Act 2013, the government had revised the FED structure on cigarettes on the basis of FED slabs proposed by the multinational cigarette manufacturing companies. The companies have also committed to make the said growth in revenue collection after incorporation of new FED structure on cigarettes. Sources said that one of the units has shown 15 percent growth in FED collection against the committed target of 20 percent. The second company has shown even below 15 percent growth in collection during the period under review.

In 2013-14 budget preparation exercise, the FBR had proposed a very simple FED structure for levying duty on cigarettes. At that time, the proposal was duly approved by the Finance Ministry for revision of the FED slabs on cigarettes. However, a new proposal was floated by the cigarette manufactures which was incorporated in the Finance Act, 2013.

Through Finance Act 2013, the First Schedule of the Federal Excise Act 2005 was amended to replace the three tier FED structure with two-tier specific rate structure. The revised FED structure on cigarette was drafted by the multinationals and the same was duly incorporated in the Finance Act. This was for the first time that the Federal Board of Revenue (FBR) has taken major budgetary measure of the FED on the basis of proposal drafted by the cigarette manufacturers.

According to the revised FED structure, the rate of the FED would be Rs 2325 per thousand cigarettes where locally produced cigarettes if their on-pack printed retail price exceeds Rs 2286 per thousand cigarettes. The rate of the FED would be Rs 880 per thousand cigarettes where locally produced cigarettes if their on-pack printed retail price does not exceed Rs 2286 per thousand cigarettes. The FBR has estimated to collect Rs 12 billion from the revised FED structure on cigarettes. Enditem