Pakistan
Pakistan’s Federal Tax Ombudsman (FTO) has found that the Federal Board of Revenue (FBR) was not collecting its full potential of federal excise duty (FED) and general sales tax (GST) from a majority of cigarette manufacturers by either failing to conduct proper audit or ensuring account of production of these units.
According to an FTO report, 2016-17 revenue from the cigarette sector had considerably declined, despite the fact that snap monitoring of production of the cigarette units was in place for smaller units. The report said this negative trend was triggered by departmental action under Section 40B of Sales Tax Act read with 45B of FED being reduced to mere physical presence of FBR staff at the manufacturing premises of the small cigarette manufacturers without having access to the record of production, sale of goods, and stock position, as well as posting FBR officials at said premises without checking their integrity and competence.
FTO has recommended FBR to introduce electronic record keeping and real-time data exchange between manufacturers of cigarettes and FBR formations till electronic monitoring, tracking and tracing system are operationalized.
FTO has also recommended FBR to form a dedicated enforcement IT team focused on evasion in tobacco/cigarettes and other evasion prone sectors; entrusted with suitable powers to intervene across the jurisdiction, as well as for FBR to extend the procedure prescribed for monitoring green leaf threshing (GLT) units under rules.