Formation of Senate Committee on tobacco tax triggers ‘conflict of interest’ question

By Staff Reporter

ISLAMABAD: A Senate’s special committee, set up to review the newly enhanced rate of advance withholding tax on tobacco draws criticism from growers that the new body could turn out to be toothless.

Chairman Senate Sadiq Sinjrani had directed to set up the committee after tobacco farmers expressed their disapproval of an increase in advance withholding tax to Rs390 per kg.

The government recently promulgated an ordinance that has jacked up the tax on tobacco from Rs10 per kg to Rs390 per kg in an attempt to check alleged tax evasion through the selling of untaxed cigarettes in the local markets.

A 15 member special committee has been established under the chairmanship of Senator Abdul Ghafoor Haideri. However a conflict of interest question could arise as two senators on the committee are also amongst key players of the local cigarette manufacturers industry.

Senator Dilawar Khan and Senator Faisal Saleem Rahman were among those who had approached the Islamabad High Court against Track and Trace implementation.

Senator Mohsin Aziz argued in the meeting that the advance withholding tax was not imposed on growers. “The withholding tax has been increased from Rs 10 per kg to Rs 390 per kg on the stage of tobacco processing and is adjustable against the formal tax.”

Senator Aziz said it was an issue among the multinational and local cigarette manufacturers and it had nothing to do with the growers.

He suggested that the Terms of Reference of the special committee should be improved. The terms of reference proposed by the committee stated it was established “to investigate the disparity in tax imposition by the FBR on growers as well as on local manufacturers of tobacco products, which is leading to the shutdown of the local tobacco industry, causing great harm to employment and business particularly in the province of Khyber Pakhtunkhwa”.

Senator Khan and Faisal Saleem Rahman supported the ToRs and stated that it was sufficient to probe on the basis of these ToRs.

The FBR’s Member Inland Revenue Operation explained that this tax was not imposed on tobacco growers but it was adjustable which could be refunded at the time of finalizing of tax liabilities.

President Kissan Ittehad however claimed that tax was impacting the growers as the local industry was not purchasing tobacco from them. “This tax has resulted in the monopoly of the multinational companies.”