The committee members said, "Instead of getting us into unending discussion, inform us why the FBR not started monitoring the GLTs last year to have a clear idea which cigarette manufacturer is buying processed tobacco." Dr Iqbal told the committee that the tax collecting body is planning to supervise the GLTs but it needs regulatory powers to do so. "There are some GLTs that are owned by the cigarette manufacturers and there is no FED over them, we are looking forward to implement FED at them too," he added.
The committee was briefed by Pakistan Tobacco Board (PTB) that around 60 percent of tobacco is grown in Khyber Pakhtunkhwa and there are 26 cigarette manufacturing companies in the country, while 10 green leave thrashers (GLT) process tobacco for consumption by the cigarette industry. The committee was informed by PTB that there are no unregistered GLTs in the country and after the merger of FATA with KP, four GLTs in Bara area of Khyber Agency are being registered with FBR.
The briefing triggered a new wave of argument as the senators questioned the performance of the FBR for not monitoring the GLTs. The FBR officials endorsed the viewpoint of multinationals that two cigarette manufacturers, who have 65 percent market share, pay 98 percent of the total tobacco taxes, whereas all others, who have 35 percent market share pay only 2 percent of the total taxes. Third Tier (third slab of excise duty on cigarettes) helped government revenues increase from Rs 74 billion from 2016-17 to Rs89 billion to 2017-18 whereas the third tier also helped reduce illicit trade by 6 percent.
The meeting of the special committee noted that the country needs urgent measures to enhance tax collection and directed the Federal Board of Revenue (FBR) to explain rationale of introducing the third tier for collecting FED on cigarettes within ten days. The committee was briefed by representatives of two multinational cigarette manufacturing companies, who supported the three tier mechanism on the ground that it would eventually help increase FED collections.
There are certain misstatements and misrepresentation of tobacco taxes in media. It is pertinent to note that in the budget 2018/19, the excise rates have also increased by more than 6, and it is entirely inaccurate to state that they have not increased. It is also important to mention that only two manufactures contribute 98 percent of the government revenue from tobacco industry and all others who represent circa 33 percent (June 2018) of market only contribute 2 percent of government revenues, representatives of two multinational cigarette manufacturing companies added. The counter arguments were presented by the Secretary Health Zahdi Saeed and representatives of NGOs working in health sector. Representatives of PANAH and SPARK highlighted that due to III-tier system, cigarettes have become cheaper which has increased their sales and led to higher health risks for Pakistanis.