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Cigarette manufactures in Azad Jammu & Kashmir (AJK) are supplying/selling huge quantity of low-priced cigarettes in Pakistan, resulting in dumping of tax evaded tobacco products, which has been detected by Inland Revenue Enforcement Network (IREN) a special task force of Federal Board of Revenue (FBR).

Sources told Business Recorder here on Wednesday that the seriousness of the matter is evident from the fact that the IREN-FBR has intercepted trucks loaded with huge quantities of tax evaded cigarettes manufactured by units located in AJK. IREN of the FBR has immediately taken up the matter with the AJK tax authorities to control dumping of tax evaded cigarettes which is a complete violation of Pakistan’s tax laws. The laws prescribe a minimum price threshold for the payment of duty/taxes. The IREN has the evidence to prove that the retail price being charged is even lower than the amount of duty/taxes payable on the saleable packet of cigarette. While the same FED/Sales Tax laws apply in both tariff areas (AJK and Pakistan), the sale below the said minimum price itself constitutes the evidence that no duty/tax has been paid on such supplies.

Sources said that surprisingly the trucks having tax evaded cigarettes manufactured in AJK traveled to Pakistan without any check by the AJK tax authorities at border areas. The IREN has observed that huge quantity of low priced cigarette is being supplied & sold in Pakistan by AJK based cigarette manufacturers. The special task force of FBR is repeatedly approaching the AJK tax authorities to stop movement of low-priced cigarettes from AJK into Pakistan, sources said.

Discreet market survey conducted by IREN in Punjab province abundantly reflects that local market is flooded with low priced/non-tax paid cigarette of AJK origin. Different retail outlets have been videotaped by IREN teams which gives real time & foolproof evidence of sale of AJK based cigarette in Pakistan below the minimum price (inclusive of duty/taxes).

Office of Central Coordinator IREN, Regional Tax Office (RTO) Rawalpindi, offers AJK tax authorities to nominate an officer/team which shall be facilitated by IREN in its verification of on ground position at any location between Rawalpindi and Lahore. This joint team can visit various retail outlets at any town; city or roadside market for verification of our assertion/reservation regarding dumping of low priced cigarette in Pakistan orchestrated by AJK based cigarette manufacturers. The IREN has the mandate to check, inspect, seize and confiscate the counterfeit or non-duty/tax paid cigarette within territorial limits of Pakistan, irrespective of its origin.

According to sources, a recent study conducted by a credible research think tank says that FBR is losing revenue over Rs 25 billion per annum and the chunk of prevailing non-tax paid segment is expanding day by day. In order to forestall this menace, the FBR has recently constituted a special task force “Inland Revenue Enforcement Network” (IREN) against illicit trade of cigarette/tobacco. This network has launched a massive campaign against all segments of non-tax paid cigarettes/tobacco in Pakistan. Moreover there is no mechanism for online verification of payment of duty/taxes on cigarettes being manufactured in AJK; therefore, for Pakistani tax authorities all AJK origin supplies remain un-vouched. In the light of foregoing AJK tax authorities and AJK Council were requested during the meetings that proper & formal liaison is required for regular communication of information/record including list of cigarette manufacturers along with schedule of machinery installed and its manufacturing capacity, complete list of Pakistan and AJK based sole agents, distributors and wholesalers of aforesaid manufacturers and payment of duty/taxes made by each manufacturer since July, 2015 till March, 2017.

As FBR is losing huge revenue on account of low-priced cigarettes flooded by AJK cigarette manufacturers, therefore an urgent & prioritized response is requested. “You would appreciate that rampant tax evasion is detrimental to the interest of both AJK and Pakistan’s tax authorities. IREN combined and synergized coordination is going to benefit both and any enforcement action by IREN (in line with our current practice in Pakistan) would rather give a boost to AJK tax revenues.”

In a recent session held of the National Assembly’s Standing Committee on Commerce, it was recommended to form a committee regarding the illegal sale of cigarettes. During the session, Minister for Commerce Khurram Dastgir brought to the notice of the Committee that illegal cigarettes are being sold in the market. He stated that there is a minimum tax of Rs 44 per pack of cigarettes, but could not understand how cigarettes are being sold for 15 to 30 rupees per packet in the market.

The illicit trade in cigarettes has risen to more than 40% of the market, where almost 2 out of every 5 cigarettes is illegal. Whereas, the consumption of cigarettes has remained the same, the illicit sector continues to grow and eat at the legitimate industry’s share and volumes. Estimates in Pakistan reveal that more than Rs 100 billion in potential revenues has been lost by Government of Pakistan in the last 5 years. In the last fiscal year alone (FY 15-16), revenue leakages, due to a thriving illicit cigarette trade, went up to the tune of Rs 45 billion. Nearly 10% of the global market is illicit and that illicit trade is significantly higher in low and middle income countries, up to 50% and more. Pakistan, a developing economy, is facing a similar dark market where illicit cigarettes are sold openly and in blatant violation of various laws.

Experts added that in case of Malaysia there is a very high illicit trade of cigarettes ie over 50 percent and tobacco companies are closing their business. Same is the situation in Pakistan where percentage of illicit trade is very high.


BERLIN: German authorities said Wednesday they had opened a probe into up to 2,000 companies registered in Malta on suspicion of tax fraud, after receiving an anonymous tip.

“There are branches of big German corporations on this long list,” the finance minister of Germany’s most populous state North Rhine-Westphalia (NRW), Norbert Walter-Borjans, told reporters in Berlin.

The nameless informant handed over a USB stick listing 70,000 companies registered in Malta, of which between 1,700 and 2,000 are linked to German corporations, Walter-Borjans said.

He said there was “strong suspicion” that the nominally Maltese firms linked to major German corporations were trying to dodge tax laws as shell companies.

“Our investigators with global contacts will not be steered off course in their campaign against tax evasion and won’t be intimidated,” he added.

NRW has spearheaded Germany’s campaign against tax cheats who attempt to hide their holdings offshore.

Since January 2006, several German states have bought CDs or USB sticks containing stolen data on German tax cheats.

NRW alone has bought 11 CDs, which it says have led 120,000 German citizens to self-report Swiss bank accounts and pay back-taxes and fines.

The latest announcement from NRW, which goes to the polls on Sunday, comes just weeks after German prosecutors said they had arrested a Swiss man, identified as Daniel M., 54, on suspicion of espionage since 2012.

Media have reported that the alleged spy had run a paid mole inside the NRW finance ministry in a bid to monitor cross-border tax probes.

In May 2015, the EU and Switzerland signed an agreement on exchanging bank data from 2018 that will effectively end the Swiss tradition of bank secrecy for members of the bloc.



Australia’s big banks will likely swallow a surprise new A$6.2 billion ($4.56 billion) federal tax, industry and political sources said on Wednesday, given a lack of public support for an oligopoly that has reaped years of record profits.

The tax on liabilities unveiled in Tuesday’s federal budget caught banks, which had previously enjoyed the support of the ruling center-right government, unawares and was strongly criticized by bank executives.

“We didn’t get a chance to engage; it was a snatch and grab and that’s that,” one senior source at a major bank told Reuters.

The announcement was seen by political analysts as payback for the government’s efforts to block opposition calls for a wide-ranging inquiry into misconduct in the banking sector.

Treasurer Scott Morrison justified the tax as necessary to get the budget back into the black and also tapped into popular opinion, saying the charge was just a small portion of the banks’ profits.

He cautioned the so-called Big Five – Commonwealth Bank of Australia (CBA.AX), Westpac Banking Corp (WBC.AX), Australia and New Zealand Banking Group Ltd (ANZ.AX), National Australia Bank Ltd (NAB.AX) and Macquarie Group Ltd (MQG.AX) – against passing the costs on to consumers.

The tax resembles a charge imposed on big mining companies in 2010 that was ultimately re-designed after an industry advertising campaign which helped unseat the then Labor prime minister, Kevin Rudd. Banking sources said they had little leverage to mount a similar campaign due to modest support within parliament.

“It is a done deal, I don’t think you can put a wedge in that,” said another representative of the Big Five.


The affected banks all came under immediate share price pressure late on Tuesday and again on Wednesday morning, before some of their losses were pared.

Westpac Chief Executive Brian Hartzer said on Wednesday the government’s reforms ran counter to the prudential regulator’s objective of making bank balance sheets “unquestionably strong”.

“Higher taxes reduce the banks’ ability to generate capital that supports lending and stability in times of stress,” Hartzer said in a statement.

“There is no ‘magic pudding’. The cost of any new tax is ultimately borne by shareholders, borrowers, depositors and employees.”

Bank chiefs received a phone call roughly one hour before Morrison revealed the budget measure on Tuesday evening, four sources said, catching them unawares. The sources, from banks and political offices, declined to be identified because they were not authorized to speak publicly.

The tax is designed to prevent the banks from passing the cost on to lending customers, targeting liabilities such as corporate bonds, commercial paper, certificates of deposit and tier-2 capital instruments, rather than mortgage books.

Commonwealth Bank Chief Executive Ian Narev indicated the bulk of the cost could be passed to customers, likely through interest rate changes, and to shareholders through lower dividends. The alternative, according to Morgan Stanley analysts, is an estimated 4.5 percent cut to the banks’ annual earnings.

“As every business owner or employee knows, every extra cost needs to be borne by customers or shareholders, or a combination of both,” Narev said in a statement.

NAB Chief Executive Andrew Thorburn said the tax would affect 10 million customers as well as shareholders. ANZ and Macquarie said the impact was unclear.

The tax lifted stock prices of smaller lenders as investors bet it would crimp the big banks’ competitiveness.

Shares in Bendigo and Adelaide Bank Ltd (BEN.AX) rose as much as 4.8 percent, their sharpest daily gain in three years, while Bank of Queensland Ltd (BOQ.AX) added four percent.


Business, Taxation
Directorate of Intelligence & Investigation, Inland Revenue, Lahore on Tuesday arrested managing director, chief financial officer and director of an electronics company allegedly involved in massive sales tax evasion/tax fraud.

It is learnt that acting upon a credible information pertaining to massive sales tax evasion/tax fraud tax committed by M/s Orient Electronics (Pvt) Ltd (company) by way of under-declaration of value of supply of its products/taxable goods and parking of additional amount (actual receipt – declared receipt) of consideration received against actual value of supply in a bank account titled M/s Bismillah Trading Corporation (M/s BTC), at a bank, the Directorate of Intelligence & Investigation, Inland Revenue, Lahore initiated investigations against the said companies and their connivers under section 38 read with proviso of section 25(2) of the Sales Tax Act, 1990 with the approval of the competent authority.

Investigation in the matter revealed that the above-said bank account was maintained in the name of two employees of company but actually operated by Talat Mehmood, Managing Director of the said company of Lahore. Further investigations in the matter revealed that more bank accounts in the name of dummy businesses & employees of the company were also opened & maintained which were / are actually operated by the managing director.

It was further revealed that the company is engaged in suppression of value of supply / under declaration of value of supply of its goods during the period from July 2008 to June 2013 and is involved in evasion of tax by making payment of sales tax & extra tax and special excise duty thereon suppressed prices of its goods / articles without mentioning the trade discount. The CEO/MD of company has been involved in maintaining and operation of five benami bank accounts wherein suppressed sale proceeds amounting to Rs 6,610,560,917 were parked.

The company during the period from 01-07-2008 to 30-06-2013 has declared value of supply amounting to Rs 33,617,059,899 in the sales tax returns against actual value of supply amounting to Rs 56,299,214,332 worked out on the basis of available price lists of its products, thus, company has suppressed sale prices/value of supply amounting to Rs 22,682,154,433, on which sales tax & extra tax come to Rs 3,882,153,009 as per the provisions of section 2(46) (a) & 2(46)(b) read with section 2(28) and section 3 of the Sales Tax Act, 1990 and chapter-XIII of the Special Procedure Rules, 2007 besides special excise duty amounting to Rs 150,296,736 comes in terms of section 3A of the Federal Excise Act, 2005. Assessment order No 03/2016 dated 16.03.2016 has been passed by the DCIR LTU Lahore wherein company has been directed to pay evaded amount of sales tax amounting to Rs 3,710,295,446, extra tax amounting to Rs 171,857,553 and special excise duty Rs 150,296,736 (total Rs 4,032,449,744) under section 11(2) &11(3) of the Sales Tax Act, 1990 and section 14 of the Federal Excise Act, 2005 along with default surcharge under section 34 of the Sales Tax Act, 1990 and section 8 of the Federal Excise Act, 2005 (calculated at the time of recovery).

A penalty of 100 percent of the amount of sales tax involved was also imposed in terms of section 33(13) of the Sales Tax Act, 1990 and five times duty under section 3(c) of the Federal Excise Act, 2005 being involved in commission of tax fraud. Substantial material evidence so collected during the course of investigations are in the shape of chain of evidence which beyond any shadow of doubt confirms that the management of company of Lahore in connivance with their buyers, abettors/connivers & others etc have suppressed value of supply/under declared value of supply of its goods during the period from July, 2008 to June, 2013 and is involved in evasion of tax by making payment of sales tax & extra tax and special excise duty thereon on suppressed prices of its goods/articles without mentioning the trade discount, if any, on sale invoices, hence, committed tax fraud as defined under section 2(37) of the Sales Tax Act, 1990.

According to the policy devised by Khawaja Tanveer Ahmed, the Director General, that tax evaders should be sent before the Court for trial, FIR No 01/2017 dated 08.05.2017 has been registered against Talat Mehmood, Managing Director, Ahmed Fazil, & Mian Abdul Rehman Talat , Directors, of company, Aleem Amin, Chief Financial Officer / Head of Finance of the Company, Muhammad Tariq Khokhar S/o Khair Muhammad Lahore, Nazimud Din Qamar S/o Qamar ud Din Assistant Manager Sales, of company, Adeel Khokhar S/o Muhammad Tariq Khokhar Lahore and their buyers, abettors / connivers & others etc.

On the same day, Talat Mehmood, Managing Director, Abdul Rehman Talat, Director, and Chief Financial Officer of company of Lahore have been arrested, by the Lahore Directorate, being involved in the subject case. Facts/Grounds of arrest have accordingly been served to the accused persons. The above said accused person were produced before the honorable Court of Special judge Customs Excise and Taxation Lahore where the Court has granted physical remand for three days for recovery of material evidence. The investigations are under way. The Director General applauded the efforts of Lahore Directorate and advised for early completion of investigations.

The illegal refusal of Excise & Taxation, Islamabad Capital Territory (ICT) to the Federal Board of Revenue (FBR) for registration of auctioned vehicles has hampered revenue collection from Customs’ auction of confiscated vehicles during the last quarter (April-June) of the current fiscal year (2016-17).

Sources told Business Recorder here on Wednesday that the collector Model Customs Collectorate (MCC) Islamabad has approached FBR, chief commissioner ICT and director general Excise & Taxation, ICT, on the refusal of excise & taxation officers to register vehicles auctioned by MCC Islamabad.

Sources said the collection through customs auction was top priority of the FBR to generate additional revenue in the last quarter of 2016-17. However, the current situation would discourage Customs’ auction of confiscated vehicles having serious revenue implications. Legally, the officers of E&T, ICT, are legally bound to register auctioned vehicles following due verification process.

According to the collector, the office of the E&T Officer Islamabad has refused to initiate the registration process of vehicles which have been lawfully auctioned by the said collectorate and hold a bona fide status. The stated position is adversely affecting the Customs’ auction of confiscated vehicles leading to a financial loss to the federal exchequer and that too in the last quarter of the current financial year (2016-17).

As the said refusal to initiate the registration process of these vehicles is without any lawful authority and is against the interest of the state, it is, therefore, requested that the concerned officers may be directed to register the vehicles auctioned by Model Customs Collectorate Islamabad after due verification and in accordance with the provisions of law, the collector added. The collector has requested the chief commissioner and DG Excise & Taxation, ICT, to personally intervene to resolve the matter without any delay, sources added.

Business, Taxation
Securities and Exchange Commission of Pakistan (SECP) has proposed that the research analysts, preparing reports on securities listed on stock exchange, would refrain from speculating or predicting the outcome of matters pending before the courts. Through SRO No 314(1)/2017 issued here on Thursday, the SECP has proposed amendments in the Research Analyst Regulations, 2015.

According to the proposed amendments, the independent research analyst, research entity and research analyst shall have adequate documentary basis, supported by research, for preparing a research report. The research analyst shall ensure that facts in the research reports are based on reliable information and the source of such information is disclosed.

Further, the research analyst shall refrain from speculating or predicting the outcome of matters pending before the court of law. In case a research entity obtains content of a research report from a third party and publishes it under the research entity’s name, such third party shall be treated as a research analyst for the purposes of these Regulations and shall be responsible for compliance with these Regulations and shall make all necessary disclosures of any material conflict of interest in such research report. Such research entity shall also provide disclosures required under these Regulations in the research report.

Independent research analyst, research entity and such research analyst, who sell their research to research entities but is not employed with them, shall inform the Commission before commencement of its business for the purposes of record. It said the public appearance means any participation in a conference call, seminar, forum (including interactive and non-interactive electronic forum and electronic communication), radio or television or internet or web or print media broadcast, authoring a print media article or other public speaking activity in which a research analyst, or an officer, director, or employee of a research entity or independent research analyst, makes a recommendation or offers an opinion, concerning listed securities or a public offer.

Research analyst means a person, by whatever name called, who is involved in the preparation, writing and/or publication of a research report or the substance of a research report concerning securities that are listed or to be listed on a stock exchange registered in Pakistan and includes such persons or firms who prepare research reports and sell them to a research entity for publication under the research entity’s name, it said.

Research entity means a company which provides services of issuance of a research report in its own name through the research analysts employed by it or through third party research analysts not employed by it and which is also engaged in providing certain services for the securities market, the regulations added.

Directorate General Customs Valuation (DGCV) has revised the customs values of different types of chemicals under section 25(9) of the Customs Act, 1969. According to the revised valuation, the customs values of chemicals such as Isopropyl Alcohol, N-Propanol, Cyclohexanone, Ethoxylated Nonyl Phenol, Iso-Butanol, N-Butanol and Phenol were earlier determined through valuation ruling 920/2016.

The stakeholders have asked the relevant authorities to reconsider the linking of customs values of aforesaid items with ICIS Scan. They urged that it would be appropriate to determine the applicable customs values afresh. Moreover, the importers have also requested to revise the prices of subject chemicals in accordance with the prices in the International market.

For the purpose, stakeholders including importers, Pakistan Chemicals and Dyes Merchants Association (PCDMA) and representatives from clearance Collectorates, were invited on April 12 and May 8 last to discuss the current international prices of the subject chemicals.

Meanwhile, the commercial importers stated that the prices of subject items are required to be de-linked from the ICIS scan which was duly supported by the PCDMA. Moreover, the importers requested that the customs values of the subject chemicals may be determined for imports in drums packing, however adjustments may be made for imports in bulk iso-tanks or in bulk-vessels. The viewpoints of all participants were heard in detail and were considered to arrive at Customs value of the subject chemicals.

After applying transaction value method, identical goods value method, deductive value method & valuation method, the authority finally examined PRAL database, market information and international prices through ICIS scan, thoroughly. Consequently, the Fall Back Method as provided under section 25(9) of the Customs Act, 1969 was applied to arrive assessable customs values of chemicals.

Senior citizens have demanded 70 percent reduction in tax liability as per Income Tax Ordinance 2001. Talking to this scribe, Omar Hayat, a retired government official said the age of the individual should be 60 years or more on the first day of the tax year (This means that for the tax year 2011 which corresponds to 12 months period of July 01, 2010 to June 30, 2011, the age as on July 01, 2010 should be of 60 years or more); The taxable income should not exceed Rs 1,000,000 as applicable to a non-salaried taxpayer, assuming that the salary income is less than 50 percent of taxable income [Clause (1A) of Part III of 2nd Schedule to the Income Tax Ordinance, 2001].

The Taxable income level of senior citizen should be elevated as is being done in other cases from Rs 1,000,000 to 15,000,000 as applicable to non salaried taxpayers. The Senior Citizen who renders services is liable to 15 percent income tax deduction being non filers of income tax returns. Further they are providing services based on their qualification and experience which other cannot provide. This aspect has not been looked at by the Finance managers.

The Senior Citizens are contributing to the national economy through provision of services and contributions to GNP and GDP in services sector. There should be some mechanism to provide them relief of Income Tax so that they continue to provide their services such as reduced rate of tax @ 10 percent as being paid by Tax fillers

Similarly, now as it has been proposed that 0.5 percent wealth tax will be levied on wealth of the citizens in the country. This will be blow to the mental status of the senior citizen as they have constructed their houses in posh area and the present worth of the same house has risen to millions of rupees. If this tax is levied on them they will be unable to pay it as they have meager resources to meet their own expenses and their medical treatment such as expensive medicines etc.

They have to sell the same and they will be deprived of their shelter. The retired Government servants are already in miserable condition due to living conditions in the country. Some of them even own a plot to build a shelter for their living, protection should be provided to retired government servants from these new taxes.

Another issue which needs to be addressed in the new budget is Tax Exemption. No relief is given to persons whose parents have reached the age of 85 years or more than 65 years who are totally incapacitated by reason of physical or mental infirmity and they are themselves retired Government servants and they have to pay the service changes of maid or nurse to take care of daily heath care, this may include wife or husband or wife needs to be provided Tax exemption or relief in some way, exemption to Retired Government Servants from Capital Gain Tax

The retired government servants sell their property for number of reasons as their income source is reduced and has to meet number of liabilities such as marriage of their daughters, medical treatment at private hospitals and treatment of wife or mother or father or dependent children under such circumstances senior citizens need relief

Exemption Relating to Medical Expenses of incapacitated persons and if any person is permanently incapacitated because of physical or mental infirmity, a gift or inheritance taken by him to meet medical expenses (including, for example, the cost of nursing home care) should be exempted from gift or inheritance tax.

Business, Taxation
Pakistan is likely to seek unilateral concession on 40-50 tariff lines from China during the visit of Prime Minister Nawaz Sharif starting from Friday (today). Prime Minister entourage will comprise Chief Ministers, Federal Ministers and officials. Commerce Minister, Engineer Khurram Dastgir Khan is also accompanying the Prime Minister.

“We have identified 40-50 items for unilateral concessions prior to entering into the second phase of Free Trade Agreement (FTA) which will be placed before the Chinese leadership. Relocation of Chinese industry is part of the agenda of Prime Minister,” said an official Pakistan, sources said, will also convey concerns of domestic industry to the Chinese side as incentives being offered to China in Special Economic Zones (SEZs) will be disincentives for the domestic industry. Pakistan and China have held several rounds on FTA-II but the outcome shows that both sides are still reluctant to proceed further due to disagreement on some of the issues.

Earlier, China had agreed to compensate Pakistan for losses in trade but later on the Chinese official backed out, saying that ””he did not understand English properly that””s why it was written in the minutes””. In December 2016 Pakistan and China held talks to review the FTA but failed to evolve a consensus on a methodology to further expand FTA after both sides expressed dissimilar claims of the impact on bilateral trade.

Pakistan-China volume of trade which was in the range of $4 billion in 2006-07 reached an all time high of $13.77 billion in 2015-16. The sources said, under-invoicing is one of the key issues between the two countries due to which a difference of at least $2 billion has been reported. Standing Committees of Senate and National Assembly on Commerce have also raised this issue on several occasions.

According to sources, Islamabad has taken principled decision that it will not go for FTA II until its concerns are resolved properly. Commerce Ministry has also sought Prime Minister””s guidance for further action. China, sources said, maintains that Pakistan has to follow the world with respect to liberalization if it wants to compete in the world. “China wants Pakistan to open 90 per cent of its trade immediately and is ready to give even 15 years for liberalization of ten per cent tariff,” the sources continued.

Commerce Ministry has conducted a study which shows that import of cheap raw material from China has increased competitiveness of Pakistan””s industry. In addition, the Commerce Ministry is calculating revenue impact of FTAs, expected this year, as Federal Board of Revenue (FBR) maintains that FTAs are inflicting a revenue loss.

Another official said that no scientific study has been conducted on CPEC””s likely impact on local industry and industry so far, and no one knows whether its impact would be positive or negative. During the meeting of December 2016, the Pakistani side highlighted the need for dovetailing all projects for co-operation between China and Pakistan including CPEC long term plan and CPFTA for integrating both the economies. In this regard, Pakistan referred to the protocol signed between the two countries in 2009 which provides a legal framework for incentivizing Chinese investment in Special Economic Zones and tariff reduction/elimination on the products manufactured in these zones. Both sides agreed to further hold internal consultations on ways and means to implement the protocol which was an integral part of CPFTA. The two sides had also agreed to discuss this issue in detail in the next round of negotiations. Commerce Minister argues that there is a delay in the finalization of FTA-II with China due to differences, adding that Pakistan will expand trade with China when imbalance of trade will be rectified.

On the pattern of powers delegated to Law Enforcement Agencies (LEAs), the government may grant anti-smuggling powers to the Directorate General of Intelligence and Investigation Inland Revenue (IR) in budget (2017-18) to check smuggled & foreign counterfeited cigarettes.

Sources told Business Recorder here on Thursday that the Federal Board of Revenue (FBR) is considering different proposals of the Inland Revenue Enforcement Network (IREN) – a special task force of Federal Board of Revenue (FBR) for coming budget. At present, anti-smuggling powers have been delegated to the law enforcement agencies (LEA) without analysing any data or outcome of performance of LEAs in checking smuggling of cigarettes at borders. However, keeping in view the remarkable performance of Directorate General of Intelligence and Investigation Inland Revenue, powers may be extended to the said directorate of IR on the pattern of LEAs, sources said.

A meeting of IREN was held at Directorate General I&I-IR Islamabad attended by all the stakeholders/members. In the said meeting all relevant aspects of combating illicit trade of cigarettes/tobacco was discussed threadbare and decisions were communicated by IREN for further necessary action by the concerned wings of IR at FBR. The Inland Revenue Enforcement Network recommended to do away with Section 40B of Sales Tax Act 1990 from the local cigarette manufacturing units as the same has become toothless and futile. Currently seizures of non-tax paid cigarettes are being jeopardised because of department”s inaction against the officials whose presence fails to forestall clearance and transportation of non-tax paid cigarettes. It is further proposed that this action needs to be invoked for monitoring at GLT (green leaf thrashing) Units.

In line with the Board”s existing policy of delegation of enforcement powers to various law enforcement agencies, similar delegation of anti-smuggling powers to Directorate General I&I-IR, with specific reference to smuggled & foreign counterfeited cigarette may be considered in the forthcoming budget, it recommended.

The Board is requested to review the existing mechanism of auctions of seized smuggled cigarette by customs department against the payment of duty/taxes. Currently this regime is being grossly misused and on the strength of paltry amounts paid against auction certificates, huge quantities of non duty/tax paid cigarette is being sold in the market. The Board may like to ascertain the volume of revenue currently being raised under this head. If the amount is negligible then all such stocks may be outrightly confiscated for destruction. In case substantial revenue is involved then foolproof certification mechanism is to be put in place, whereby cigarette-specific auctions be properly documented and linked with stock taking – this system would help ensure that auction and onward sales are equal.

The Inland Revenue Enforcement Network recommended hiring of suitable premises/buildings to be used as warehouses for confiscated tobacco/cigarettes. Custom authorities are requested to provide data to IREN regarding the import of cigarette paper & filters to determine exact manufacturing capacity of registered manufacturing units and also to unearth differential number, it recommended.

Adequate workforce shall be provided to Directorate General of Intelligence & Investigation-JR to ensure proper monitoring of cigarette/tobacco sector, it recommended.

The Inland Revenue Enforcement Network recommended that funds for weapons & bullet proof jackets may be provided to raiding teams in order to ensure their safety and security in case of resistance from the other end, sources added.