Islamabad, November 15, 2024 – Minister of State for Finance and Revenue, Ali Pervaiz Malik, has emphasized the need to alleviate the tax burden on salaried individuals by curbing widespread tax evasion in the tobacco industry. Addressing a roundtable on Thursday, he expressed the government’s commitment to reducing income tax for the salaried class, contingent upon the Federal Board of Revenue (FBR) recovering an estimated Rs 300-350 billion lost to non-duty-paid and smuggled cigarettes.
The roundtable discussion, hosted by the Institute of Public Opinion and Research (IPOR) in collaboration with PILDAT, brought together government officials, industry leaders, policy experts, and media representatives. The event focused on the FBR’s Track and Trace System (TTS) compliance, a regulatory initiative designed to curb tax evasion across multiple sectors, including tobacco.
In his keynote address, Malik reiterated the government’s dedication to ensuring economic stability through collaboration among all sectors. He highlighted the pressing need for increased compliance within the tobacco industry, particularly regarding the TTS, which has been operational since 2021. Malik stressed the role of technology and digitalization in streamlining regulatory processes, urging stakeholders to work collectively toward achieving the system’s goals.
The IPOR’s latest study on TTS compliance revealed troubling findings. Conducted across 11 cities in Punjab and Sindh, the research covered 720 retail outlets. Of the 264 cigarette brands surveyed, only 19 fully complied with TTS regulations. A staggering 58% of the market was dominated by non-compliant brands, comprising 65% locally manufactured duty-not-paid products and 35% smuggled goods.
Non-compliance extended beyond missing TTS stamps to violations of minimum legal pricing (MLP) and health warning requirements. The study noted that 197 brands sold cigarettes below the MLP, while 48 brands, despite being priced above the MLP, failed to meet other legal standards. These findings underscore the challenges the FBR faces in enforcing regulations within the sector.
Speakers at the event, including Muhammad Zaheer Qureshi, project director for the TTS at FBR, highlighted the system’s enforcement gaps and technological hurdles. He outlined the importance of robust tracking mechanisms to deter tax evasion and emphasized the need for increased penalties for violations and enhanced consumer awareness campaigns.
Efforts to implement TTS compliance in the tobacco sector have faced setbacks since its inception. While selling unstamped cigarette packs has been illegal since July 2022, compliance remains inconsistent, affecting the FBR’s tax collection targets and public health objectives.
The roundtable concluded with recommendations to strengthen enforcement at the retail level, introduce stricter penalties for non-compliance, and educate consumers about the importance of purchasing compliant products. Stakeholders agreed on the critical role of sustained regulatory oversight and industry collaboration in addressing these challenges.
With the government’s directive to reduce the tax burden on salaried individuals tied to curbing illicit trade, achieving TTS compliance is now seen as a pivotal step toward fiscal sustainability and equitable taxation.
