Subpar Quality of Tax Stamps Hinders Revenue Collection Goals of Track and Trace System

Subpar Quality of Tax Stamps Hinders Revenue Collection Goals of Track and Trace System

In a recent development, an inquiry committee appointed by former Prime Minister Shahbaz Sharif to oversee the implementation of the Track and Trace System (TTS) has unveiled critical shortcomings in the system’s effectiveness, particularly in four major sectors: sugar, cement, fertilizer, and tobacco.

Despite substantial financial investments, the TTS has struggled to meet its intended objectives due to issues related to the quality of tax stamps.

The inquiry committee’s report sheds light on the glaring challenges faced during the implementation of the TTS, emphasizing that outdated technology has led to the emergence of counterfeit stamps. This has exposed the system’s inability to effectively apprehend tax evaders, resulting in significant revenue losses for the government.

The sugar industry, which plays a pivotal role in Pakistan’s economy, encountered a series of problems with the TTS. Issues such as reel breakage and non-adhesive stamps have made the system unsuitable for the 71 sugar mills operating in the country. Local conditions have exacerbated these challenges, impeding the TTS’s functionality within this sector.

Tobacco, another significant contributor to government revenue, faced initial setbacks with legal stay orders, leading to only three compliant companies and 19 non-compliant ones. Although the Federal Board of Revenue (FBR) has since entered into Memorandums of Understanding (MoUs) with local manufacturers, the report noted industry resistance stemming from the elevated prices of tax stamps and applicator machines.

The fertilizer industry, on the other hand, showed no instances of non-compliance among companies. However, the efficiency of the TTS system was hampered by issues related to auto applicators, particularly in humid conditions, highlighting the need for technological improvements.

In the cement sector, none of the companies were found to be compliant, with 24 being labeled as non-compliant. Dusty factory environments have contributed to reel breakage and stamp adhesion problems, further compounded by the high cost associated with the TTS system.

An expert involved in the inquiry committee expressed deep concern, stating, “Despite spending millions of rupees on this project, the FBR has failed to curtail tax evasion in sectors with a high history of tax evasion. Regrettably, the authorities’ failure to effectively implement the system has resulted in substantial revenue losses during these challenging economic times for the country.”

The revelation of these issues underscores the urgent need for a comprehensive review and overhaul of the Track and Trace System, with a particular focus on enhancing the quality of tax stamps and addressing sector-specific challenges. Achieving this objective will be crucial in ensuring the system’s effectiveness in curbing tax evasion and bolstering revenue collection in these vital sectors of the economy.

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