ISLAMABAD: Prime Minister Shehbaz Sharif’s recent commitment to robust tax enforcement has underscored the urgent need for the Track and Trace System (TTS) implementation across the board.
The system, launched in 2019, was expected to be fully operational by December 2023. However, its delayed rollout has exposed significant flaws in fiscal management, demanding immediate attention.
Sources told Business Recorder that during a crucial cabinet session led by Prime Minister Sharif, the rampant issues of tax evasion and illicit trade were brought to the forefront.
Delay in TTS: MoF tasked to identify the black sheep
The Federal Board of Revenue’s (FBR) delay in implementing TTS across key sectors like cement, sugar, and tobacco were highlighted.
This oversight has allowed a significant portion of domestic manufacturers to evade scrutiny, resulting in substantial financial losses. For instance, two tobacco firms with a 42 percent market share paid Rs173 billion in taxes for 2022-23, while over 40 local manufacturers, holding a 58 percent share, contributed a mere Rs3 billion.
However, Mubashir Akram, the National Convenor of the Action to Counter Illicit Trade (ACT) Alliance, has voiced significant concerns regarding TTS’s partial and inefficient enforcement. “Without fair and transparent tax collection and the full enforcement of TTS across all major manufacturers, our government’s ability to achieve its financial objectives will be hindered,” Akram remarked. “This persistent neglect threatens our economic stability and continues to deepen poverty and deprivation among our populace.”
Further insights from the Prime Minister’s remarks indicate a lack of fundamental tools like scanners, impeding regulation progress. It is alarming that merely 26 of 100 reviewed cigarette brands were compliant with the required tax stamps, while the vast majority disregard the regulations, fostering an illegal trade that inflicts over Rs300 billion in annual losses to the state from the tobacco industry alone.
The session also exposed that TTS, although a structural benchmark set by the IMF, has been reduced to a mere procedural formality rather than fully functional. The absence of adequate data use and analysis from TTS underscores a widespread issue in enforcement and utilization within Pakistan’s regulatory system.
‘We must move beyond symbolic declarations and take real action. We need comprehensive enforcement strategies that span from manufacturing to retail,’ emphasized Akram. ‘The untapped potential of TTS to bolster Pakistan’s financial health is a missed opportunity, perpetuating a cycle of ineffective tax collection and regulation enforcement.’
Prime Minister Sharif’s decision to overhaul FBR leadership marks an initial step towards greater accountability. Nevertheless, the ACT Alliance stresses continuous supervision is crucial for lasting improvements. Addressing structural problems, boosting operational efficiency, and nurturing a committed workforce is imperative for fulfilling the state’s economic objectives.
Given that Pakistan is grappling with considerable social issues — with 20 million people homeless, over a third of the population battling food insecurity, and 26.2 million children not in school — the urgency for recuperating lost revenues has never been more critical. Effective financial governance can markedly mitigate these challenges.
“Let us disprove the sceptics and reshape Pakistan’s reputation from being the ‘sick man of Indus.’ Through unwavering enforcement led by you, Prime Minister, we have the power to rejuvenate our country’s prospects and wealth,” Akram concluded.
The ACT Alliance calls on the government and relevant departments to implement a fair, transparent, and comprehensive tax enforcement strategy to protect and advance the nation’s economic interests.
Copyright Business Recorder, 2024
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