Salaried class: Govt explains how tax burden can be lessened

ISLAMABAD: Minister of State for Finance and Revenue, Ali Pervaiz Malik said Thursday that the government will reduce tax burden on the salaried class and withdraw tax on milk if the Federal Board of Revenue (FBR) is able to recover Rs 300 billion to Rs 350 billion of tax evasion from non-duty paid and smuggled cigarettes.

He was addressing the roundtable discussion on the FBR’s Track and Trace System (TTS) compliance held here on Thursday.

Malik stated that the prime minister has directed the FBR to reduce the incidence of income tax on salaried class which is only possible by controlling evasion of Rs300 billion to Rs350 billion within the illicit trade of cigarettes within the tobacco sector.

Rs237bn FED collected from cigarettes in 2023-24

Hosted by the Institute of Public Opinion and Research (IPOR) in collaboration with PILDAT, the event united key stakeholders, including government officials, industry leaders, policy experts, and media representatives, to evaluate the findings from IPOR’s latest study.

The event was chaired by Ali Pervaiz Malik, who shared his perspective on the government’s commitment to ensuring compliance within all the sector, stressing that enhanced regulatory measures are needed to achieve TTS goals.

He highlighted the ongoing digitalisation process and the importance of integrating technology to improve efficiency. He also emphasised that economic stability is a collective effort, requiring collaboration across all sectors. Malik underscored the need to raise awareness about these challenges to build a more resilient and stable economy.

The session began with the welcome remarks by Mamoon Bilal, advisor PILDAT, followed by presentation on the key findings from the IPOR study by Tariq Junaid, CEO of IPOR, who underscored the troubling levels of non-compliance within the industry.

Salaried class: Higher income tax rate of up to 35pc imposed

Efforts to implement the track and trace system in the tobacco sector kick started in 2021 along with three other sectors - cement, fertiliser and sugar. Since July 2022 selling a cigarette pack without a track and trace stamp is illegal. However, since the deadline, track and trace compliance remains a distant dream.

The IPOR conducted a market research study in 11 cities across Punjab and Sindh covering 40 retail outlets in 18 markets covering a total of 720 outlets. The focus of the study was twofold; ascertaining level of TTS compliance at point of sale and measuring compliance of the Minimum Legal Price (MLP) for cigarettes which is mandated by the FBR.

According to the report, out of 264 cigarette brands surveyed, only 19 fully adhered to the TTS regime requirements, which mandate the use of Track and Trace stamps. Non-compliant brands accounted for 58 per cent of the market, comprising locally manufactured duty-not-paid (DNP) brands (65 per cent) and smuggled brands (35 per cent) with violations ranging from missing TTS stamps to non-adherence to pricing or health warning regulations.

Furthermore, 197 brands were found to be selling below the minimum legal price whereas 48 brands which were selling above the MLP were non-compliant to the stipulated legal requirements. 19 brands were found to be compliant to all stipulated legal requirements and were selling above the MLP.

The roundtable provided a platform for stakeholders to engage in in-depth discussions about the challenges facing the TTS system, its enforcement at the retail level, and the overall impact of non-compliance on the FBR’s tax collection and public health efforts.

Key speakers included Muhammad Zaheer Qureshi, project director for the Track and Trace System at FBR, who outlined the current state of compliance enforcement and emphasised the importance of robust tracking mechanisms to deter tax evasion. He highlighted the challenges faced in implementing the Track and Trace System, including issues of industry compliance and technological adaptation, and shared insights into how the FBR is tackling these obstacles through enhanced regulatory oversight.

The roundtable concluded with actionable recommendations, including strengthening enforcement at retail levels to curb access to non-compliant brands, increasing penalties for violations, launching public awareness campaigns to educate consumers on the significance of purchasing compliant products.

Copyright Business Recorder, 2024