Lahore- The Federal Board of Revenue (FBR) has suggested 13.5% increase in FED on the premium brand segments and 15% FED increase in the value brand segment. Both these increases are well above the current inflation rate in the country. But the critical part of the proposal is to make duty predictable, stable, transparent and financially attractive for both the FBR and the legitimate manufacturers of tobacco products.
Official sources said that this proposal stipulated that the rate of the FED would be Rs2,325 per thousand cigarettes as opposed to the current Rs 2045 per thousand sticks for the premium tier Rs 880 per thousand sticks for the value brand trier instead of current Rs 762 per thousand stick. Tax experts believe that Federal excise duty (FED) on pricing of cigarettes rather than volume will not only be a lead to a complex system but will also be too dependent on the pricing. In this case government will have to intervene in the market to enforce pricing to ensure revenue. Price dependent system in the past has also encouraged some small manufacturers to sell their cigarettes at artificially low retail price.
The proposed system also provides a mechanism for gradual increase in revenue for the government under the said proposal and will help the government plan its FED collection in advance.
Another official privy to the development was of the view that the introduction of reforms in the existing system of excise taxation based on volume will not only simplify the whole process of taxation but also eliminate the dependence on the manufacturer’s pricing decision as well. He further said that this would also help to secure the long term tax base through more predicable revenue growth.