Minister of State for Finance and Revenue Ali Pervaiz Malik recently announced the government’s intention to reduce the tax burden on salaried individuals and eliminate taxes on milk if the Federal Board of Revenue (FBR) can recoup between Rs300 billion and Rs350 billion in tax evasion from smuggled and non-duty-paid cigarettes.
Malik shared these plans during a roundtable on the FBR’s Track and Trace System (TTS) compliance, where he emphasized the prime minister’s directive to cut income taxes for the salaried class. This goal, however, hinges on the FBR’s success in recovering the revenue lost to illicit trade in the tobacco sector.
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The event, organized by the Institute of Public Opinion and Research (IPOR) in collaboration with PILDAT, brought together government officials, industry leaders, policy experts, and media representatives to discuss IPOR’s recent study findings on compliance within the sector. Malik, chairing the session, reiterated the government’s commitment to bolstering compliance across all industries, stressing that economic stability demands collaborative efforts across sectors. He highlighted the role of digitalization and technology integration in streamlining processes and strengthening the economy.
The TTS, implemented by the FBR since 2021 for sectors such as tobacco, cement, fertilizer, and sugar, mandates TTS stamps on cigarette packs. However, full compliance remains a challenge. According to IPOR’s study, conducted in 11 cities across Punjab and Sindh, only 19 of 264 surveyed cigarette brands fully adhered to TTS requirements. Non-compliant brands, including locally produced duty-not-paid (65%) and smuggled brands (35%), represented 58% of the market, with many lacking TTS stamps or failing to meet minimum price and health warning regulations. Additionally, 197 brands were found selling below the Minimum Legal Price (MLP), while 48 sold above it.
The roundtable included discussions on enforcement challenges, the tax impact of non-compliance, and public health concerns. FBR’s TTS Project Director, Muhammad Zaheer Qureshi, detailed enforcement progress and challenges, citing industry compliance and the need for technological adaptation. He also highlighted the FBR’s approach to address these challenges with stricter regulatory measures.
Recommendations from the session included stronger retail enforcement, higher penalties for violations, and public awareness campaigns to educate consumers on the benefits of purchasing compliant products.
