Pakistan: Two Multinational Cigarette Making Companies: DG I&IIR Suggests Restoration of Supervised Clearance System

Source from:  Business Recorder  11/27/2012

Directorate General of Intelligence and Investigation Inland Revenue Federal Board of Revenue has suggested restoration of supervised clearance system for two multinational cigarette manufacturers, bringing big companies at par with the local manufacturers.
 
A senior official told Business Recorder here on Monday that the local cigarette manufactures of Mardan are operating under the supervised clearance system. This means that the excise inspectors or Inland Revenue officers are present at gates of cigarette companies for clearance of the cigarettes to ensure payment of the Federal Excise Duty (FED) and sales tax. On the other hand, an entirely different arrangement has been made to facilitate two leading cigarette manufacturers. Multinational companies have been allowed to clear their consignments of cigarettes from factories on self-clearance basis without the presence of tax officers.
 
While switching over from supervised clearance to self clearance system in July, 2005, the cigarette manufacturers were free to determine themselves how much duties and taxes to be paid on clearance of cigarettes. This is a clear disparity between the multinational companies and local units of Mardan - there should be a uniform mechanism for clearance of cigarettes for all the manufacturers. If registered manufacturers of Mardan have to go through a checking process, the same should be applicable to leading manufacturers. In case multinationals were given exemption from monitoring at factories, the same concession should be give to the registered manufactures of Mardan.
 
Supporting the idea of rewards for tax officials, official said that the cigarette is a high duty item and detection of smuggled or non-duty paid consignments should be subjected to rewards. At the same time, the concept of reward and punishment should also be introduced to take action against those manufacturers who were deliberately involved in clearance of non-duty paid cigarettes, they added.
 
When contacted, a tax expert said that the FBR should look into the misuse of the self-clearance facility granted to the multinational cigarette manufacturing giants, as compared to local units operating under the supervised clearance regime. There are more chances of misuse of self-clearance facility as compared to the products cleared under the supervised clearance regime in presence of the excise inspectors. After introduction of self assessment scheme in Pakistan, the excise inspectors were removed from factories of the excisable commodities under reforms in the past. In case of self-clearance facility, it totally depends on the multinational cigarette manufacturers to declare the quantity of the consignments cleared from their factories.
 
There are no excise inspectors deputed on the cigarette manufacturing premises or factories under the self-clearance facility. At the same time, the tax officials cannot check the number of cleared trucks from these two leading cigarette manufacturing units on the spot. On the other hand, the FBR has deputed excise inspectors on seven units of Mardan under the supervised clearance regime.
 
The clearances of cigarettes can be easily monitored under the supervised clearance regime due to the presence of the tax officers at the manufacturing premises of the units located in Mardan. Even if small percentage of clearances has been monitored, there is a system of supervised clearance on the factories located in Mardan.
 
According to experts, despite the fact that major chunk of revenue in the form of sales tax and federal excise duty has been deposited by two leading players, we cannot term self-clearance regime as foolproof system to avoid any misuse of the facility. The cigarette manufacturers can avoid declarations of the payment of duties and taxes under the self-clearance regime. Enditem