PAC meeting suggests raise in taxes on imported cigarettes

ISLAMABAD: The Public Accounts Committee on Wednesday suggested for raising taxes on imported cigarettes to generate more tax revenue.

The Federal Board of Revenue informed the Public Accounts Committee that cigarette companies were evading tax of between PKR 50-60 billion annually. On the other hand, taxes of PKR 160 billion were being collected annually on cigarettes while PKR 157 billion were being paid by only two companies.

The meeting of the Public Accounts Committee was held under Chairman Noor Alam Khan in which the audit paras related to the Federal Board Revenue (FBR) for the financial year of 2019-20 were examined.

Chairman FBR Asim Ahmed told the committee that the annual tax of PKR 160 billion was received from the tobacco sector and tax of PKR157 billion, i.e. 98% tax, was being paid by two multinational companies while only 3 billion rupees were being received from 20 other companies.

He told the committee there was a potential for tax collection of up to PKR 60 billion from the cigarette industry as 17% GST was applicable on local and imported cigarettes, besides federal excise duty was also being collected.

Senator Ahmed Khan said that the local cigarette makers were paying PKR 41 per pack as tax and the FBR was also charging PKR 41 per pack from multinational companies. The chairman FBR said that 65 percent tax was charged on imported cigarettes.

The Chairman PAC, Noor Alam Khan, said that they should tax cigarettes as much as they could as multinational companies were using only Pakistani tobacco. Meanwhile, the Public Accounts Committee expressed its displeasure over the lack of internal auditors in the ministries and directed all ministries to conduct internal audit. It expressed reservations over the departmental audit of the FBR and directed all government departments, except Auditor General, to submit to internal audit. Noor Alam Khan directed that audit paras will be signed by the secretaries of respective departments instead of the joint secretary.

Examining the audit para, the audit official stated the national exchequer faces a loss of over PKR 2.56 billion due to non-realization of Value Addition Tax. The Audit officials observed that in 6,874 cases, 10 field offices of the FBR did not recover the Value Addition Tax at the time of clearance of imported goods or release of confiscated goods on payment of duty and taxes. The chairman FBR said that cases worth more than 2 billion rupees were pending in the court. The PAC directed to identify the officers involved in the case and fix responsibility.

Chairman PAC Noor Alam Khan said the names of responsible officers should be brought forward, so that they were not promoted. Because of them, the performance of the entire FBR is questioned.

He remarked that all ministries and departments are required to provide all records, including internal audit, to the Auditor General. The audit officials said the chairman FBR does not attend departmental accounts committee meetings and the FBR did not provide complete records to AG. Chairman PAC Noor Alam Khan said that there are clear instructions of PAC that all records should be given to audit. “From now on, all departmental accounts committee will be chaired by the concerned secretary. Send these instructions to all ministries and an officer below Grade-21 cannot be a member of DAC,” he directed.

The audit officials said that out of the 40 ministries, 16 ministries have a Chief Financial Officer while CFOs were not appointed in 24 ministries. Also, auditors were not appointed in any ministry of the country.

The chairman FBR said the FBR has a complete audit and accounts wing. The Auditor General said the appointment in ministries will be done when the Ministry of Finance announces the seats. Officials of the Ministry of Finance told the committee that CFOs have been appointed in some ministries. The PAC directed the Finance Ministry to appoint Chief Financial officers (CFOs) and auditors in all the ministries.