TI-P seeks explanation from FBR for not pursuing cigarettes tax stamping project

Transparency International-Pakistan has asked the Federal Board of Revenue (FBR) to explain its position for not pursuing 'cigarettes tax stamping project', which was initiated by the FBR, but later dropped. In a communication to the FBR and Federal Tax Ombudsman (FTO) here on Tuesday, TI-Pakistan has received complaints on the FBR tender's expression of interest (EOI) for setting up a system to monitor manufacturing industries' production for eliminating tax theft from the economy.
In this regard, reference is made to the 'cigarettes tax stamp project' announced by FBR in 2012. TI-Pakistan was also included in the team to revise the RFP for that tender. The FBR did not process that project, which required bidders to finance the project with no investment to be incurred by FBR, and the bidder who offered the lowest percentage of additional revenue sharing with FBR would be awarded the project.
It said there was no universal system that could monitor production for purpose of tax evasion across hundreds of different products, production processes using varied technologies for production. Even if an industry-product-production-flow specific system is being sought then the solutions will have weaknesses.
It said that a system earlier planned for cigarettes was more logical which was to monitor taxes paid on products for sales in the market. All legal and logical taxes on finished products are payable once the products are clear to be moved out of the manufacturing, hence seeking production record will always require an additional surveillance to track goods supplied to the market. How can FBR or any other agency which has taken production record through "indigenous smart system", will reconcile goods supplied to 400,000 outlets vs goods produced and monitored through the desired system.
It said that what happened to cigarettes tax stamp project, and has FBR taken industry into confidence through the associations and chambers of commerce on such a step? The letter said that instead of going for highly expensive new experiment in the world of production monitoring on exchequer's funding, FBR should follow the earlier model of cigarettes tax stamp project, based on no funding by exchequer, and additional revenue collection sharing.
TI Pakistan has examined the complaint, and suggested that this whole exercise will cause loss of billions of rupees to the exchequer, as the project is likely to fail, and also many years will be lost to collect the tax evaded money. In the greater interest of success of plugging tax evasion, TI Pakistan suggests the current EOI may only be proceeded once satisfactory replies to all above queries are provided with sound and solid reasons.
FBR must also explain its position for not pursuing cigarettes tax stamp project which was initiated by FBR and then dropped. For all practical reasons and global trend the first monitoring of tax evasion in all economies had been on the heaviest taxed item which without doubt is cigarettes. A sample of four time increase in tax revenue by introducing cigarettes tax stamp project in one State of India that is enclosed for FBR to review and follow, TI-Pakistan added.