The Federal Tax Ombudsman (FTO) has urged the Federal Board of Revenue (FBR) to perform an annual examination of cigarette tobacco produced in Pakistan in comparison to claimed tobacco use by all cigarette manufacturing facilities.
According to the FTO’s special report on the tobacco industry, the FBR should promptly apply Rule 89, particularly sub-rules (2) and (3), as per SRO 1149 (1) of September 18, 2018. The failure to execute this Rule despite the passage of three years is the source of the majority of enforcement risks in the tobacco/cigarette industry. This installation alone would mitigate the majority of the dangers that FBR’s equipment is now facing.
The FBR should identify officers who should be prosecuted for purposefully delaying the implementation of Rule 89, SRO 1149 and thus brazenly jeopardising revenue, as well as Unit Officers Tobacco/Cigarette Squads RTO Peshawar who have miserably failed to implement law, rules, and prescribed procedure.
For 2019-20 and beyond, the FBR should perform an annual analysis of cigarette tobacco produced in Pakistan vs stated tobacco consumption by all cigarette manufacturing facilities, in order to determine the revenue loss caused by unaccounted for tobacco.
The FBR should improve the IREN KPK Hub by reorganising it along professional lines and giving comprehensive authority to all GLTs so that compliance, monitoring, and enforcement are all consistent. Officers and officials with sectoral knowledge, professional skill, and aptitude may be assigned the critical role of sector monitoring and enforcement.
Taxation Policy FTO asserted that the Wing, IR will undertake a periodic evaluation of this sector in order to close newly developing gaps in the cigarette/tobacco industry. Similar examinations of GLTs being evaluated at LTOs in Islamabad and Karachi are badly needed.
According to the FTO study, the tobacco/cigarette industry is one of Pakistan’s key revenue generators. During the period 2020-21, this industry provided around Rs. 130 billion in the form of duty and taxes. Despite this contribution, the stated industry is also infamous for enormous duty and tax evasion and illicit commerce.
Internal FTO investigation revealed huge tax evasion at the GLTs stage, as shown by the fact that, according to FBR findings, there was an alarming disparity between tobacco produced (as per Pakistan Tobacco Board statistics) and tobacco used in claimed cigarette production. (According to tax records).
According to the early findings of the in-house study, the underlying cause of ongoing maladministration in terms of section 2(3)(i)(d) of the FTO Ordinance was imbalanced & inefficient monitoring of GLTs due to negligence, and inefficiency of FBR’s field force.
As a result, in accordance with section 17(1) of the FTO Ordinance, 2000, the Federal Tax Ombudsman formed an Inspection Team consisting of Advisor IT (HQ) and Advisor Monitoring (HQ) on the topic “Own Motion Notice case.” The inspection team went to the RTO Peshawar’s Office of Commissioner Inland Revenue, which is responsible for regulating local cigarette makers and GLTs.
Following adequate coordination, an inspection was undertaken, and the team visited RTO Peshawar, accompanied by all necessary IRS officials from RTO Peshawar. The inspection team was informed by the RTO officials at the first and introduction sessions. The precise records and information were requisitioned, inspected, and discussed with the authorities since the inspection principally revolved around the claimed maladministration of FBR’s field force, as indicated by their deficient monitoring of GLTs.
Significant areas of examination were selected in order to determine the truth of the situation in relation to statutory and regulatory regulations. According to the FTO office, the analysis is based on comprehensive talks with tax authorities at the offices under investigation, study of relevant data during the investigation, and input from concerned tax officials.