AGP starts audit of tobacco companies

ISLAMABAD: The Auditor General of Pakistan (AGP) has started the audit of multinational tobacco companies regarding cigarette production and tax collection thereon upon the directions of the Public Accounts Committee (PAC) chairman, Syed Khursheed Shah.

The PAC chairman after a briefing from Federal Board of Revenue (FBR) chairman had ordered the AGP to conduct audit of multinational tobacco companies. Sources said that the AGP has started the audit of the tobacco companies so that the revenue collection from the industry could be assessed. The audit has been ordered in the wake of tax slabs introduced by the FBR on cigarettes. Record has been called from the companies, the sources added.

The government has kept the 3-tier system of imposition of FED on cigarettes for next year too which was introduced last year which benefitted the multinational companies, and local tax paying producers were left in the lurch. However, the FBR had taken stance that the 3-tier tax system was aimed at reducing the usage of smuggled and illicit cigarettes which grab almost 40 % of the market share.

The government, in the latest budget, announced last month has increased a levy of Rs0.96 on lowest tier of cigarettes thus making the Federal Excise Duty of Rs17 per pack of 20 cigarettes. According to budget documents, the FED on per thousand cigarettes has been increased from Rs74 to Rs79, tier 1; Rs33 to Rs34, tier 2; Rs16 to Rs17, tier 3. The government did not adopt suggestions of the Finance Committee, Ministry of National Health Services, Regulations and Coordination and other tobacco control organisations who had advised to enhance taxes on tobacco products. National Assembly Standing Committee on Finance had recommended the FBR to revert to the two-tier taxation on cigarettes by putting local manufacturers in the lower slab and the multinationals in the higher.

Last year the FBR imposed Rs74 FED per pack for brands selling above Rs90 while those falling within Rs58.5 to Rs90 were imposed a duty of Rs33 while all below Rs58.5 were imposed an FED of Rs16 per pack of 20 cigarettes. Before this there were only two tiers of cigarettes for FED, those selling above Rs88 were imposed a duty of Rs74 while all those selling below Rs88 were imposed a duty of Rs33. With the introduction of 3rd-tier, multinationals were allowed to reduce their prices to fall in tier 3 to avail tax cuts which completely wiped out tier 2 as hardly any brand now falls in that category now.

The Ministry of National Health Services, Regulations and Coordination had also recommended the FBR to discontinue the policy of decreasing taxes on tobacco products keeping in view the health of citizens.