Pakistan: Two Cigarette Giants Warned about Meeting Assigned Target

Source from:  Business Recorder  01/24/2014

The Federal Board of Revenue (FBR) Wednesday issued a stern warning to two leading cigarette manufacturing companies to meet the assigned target of Federal Excise Duty (FED) in 2013-14 to escape strict enforcement actions. Sources told Business Reorder here on Wednesday that the representatives of the two cigarette manufacturing giants met FBR Chairman Tariq Bajwa at the FBR House and briefed the tax authorities on prevailing market situation and reasons for not generating additional revenue to the tune of Rs 12 billion during current fiscal.

During the meeting with the tax authorities, the representatives of both the companies were present in the FBR. Tax authorities have categorically conveyed to the cigarette manufacturers to ensure generation of additional revenue as committed by them in budget (2013-14). The FBR also pointed out that the FED slabs were revised in last budget on the suggestions of the said cigarette company, but additional revenue to the tune of Rs 12 billion has not been collected. The current FED trends shows that the additional measures are required to collect additional Rs 12 billion FED in the remaining period of 2013-14.

The FBR has further directed the cigarette manufacturing company to share future strategy with the tax authorities for improving FED collection during 2013-14. The two cigarettes giants had 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.

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 tiers 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. Enditem