Industry sources said here on Sunday that some of local cigarette manufacturers have already approached the President House and the Federal Tax Ombudsman to take immediate remedial actions in this regard. Tax stamps are a tool to monitor and detect tax payments for certain product categories. The integrity of tax stamp technology is by itself questionable as the experience shows that despite the imposition of such stamps, the government remains unable to ensure its enforcement and in some cases even raise the corruption levels.
According to WHO FCTC the tax stamps implemented in Brazil and Turkey do not track the supply chain system and thus do not address cross-border illicit trade. The advertisement for tax stamps/labels was issued by FBR on 8th March, giving three weeks to interested bidders to apply for the project. The Board earlier this month issued a request for proposal seeking bids for procurement of tax labels/stamps supervision system for cigarette packs.
Sources stated that tax stamps are one of the most effective trades in checking smuggled cigarettes. They also said that affixing a tax stamp would help differentiate between duty paid and non-duty-paid cigarette. This opinion, however, does not seem very credible with Pakistani markets across Pakistan being flooded with smuggled cigarette packs such as ‘pine’, despite easy identification of such packs and negligible enforcement against such cigarettes.
While FBR chooses to ignore simple and effective enforcement measures. Furthermore, its implementation without strong enforcement would be impossible as those engaged in illicit cigarette trade would continue their non-compliance, either by simply flouting the law or by counterfeiting the tax stamps, they added.
The Federal Board of Revenue (FBR) has already constituted a committee to examine merits and de-merits of tax stamping on cigarettes manufactured by local industry for collecting Federal Excise Duty (FED) and sales tax as a ‘special levy’. The committee comprised stakeholders like Chief Sales Tax/Federal Excise, Directorate General of Intelligence and Investigation Inland Revenue, multinational cigarette manufacturing companies and others to check illicit trade of tobacco through tax stamping on cigarettes. The FBR reportedly intends to implement a tax labels/stamps and supervision project for the purpose of eliminating tax evasion from the cigarette sector. The committee would ensure all aspects of the projects including its implications on the cigarette industry.