Senate subcommittee flags $1 billion tobacco tax loss

A Senate subcommittee has flagged approximately $1 billion in annual revenue losses in Pakistan’s tobacco sector, pointing to tax evasion, illegal cigarette manufacturing, misuse of tax exemptions and weak controls over confiscated goods, Minute Mirror reported on Monday.

The subcommittee of the Senate Standing Committee on Interior and Narcotics Control examined the reported theft of 2,828 cartons of cigarettes from a Federal Board of Revenue (FBR) warehouse. The matter was referred to the Federal Investigation Agency (FIA) and an FIR was registered. Senate records put the loss in the warehouse case at about Rs250 million and exposed weaknesses in the system for safeguarding seized goods, the report said.

The subcommittee expressed concern that only lower-ranking officials had been nominated in the case and said responsibility should be examined at the appropriate level instead of allowing the investigation to end with field staff.

The report listed several shortcomings, including inadequate CCTV coverage, incomplete stock registers and inventory records, weak procedures for transferring seized goods between warehouses, and missing gate-pass records.

The panel also examined tax exemptions in former FATA and PATA regions and parts of Khyber Pakhtunkhwa. Members questioned handling of imports reportedly valued at around Rs1.12 trillion and sought details on whether the materials remained within the designated tax-exempt areas. The report noted concerns about manual tracking systems and the absence of automated mechanisms, and stressed that complete records and consumption certificates were needed to confirm exemptions were used according to rules.

Members asked whether enforcement in alleged tax evasion and illegal trade cases was reaching business owners and main beneficiaries, rather than focusing disproportionately on lower-level workers and transporters.

The subcommittee reviewed jurisdictional issues between the FIA and FBR and called for better coordination to avoid overlapping responsibilities. It also looked at notifications granting the Frontier Corps and Pakistan Rangers anti-smuggling powers in certain border areas. The Interior Ministry told the committee the powers had been granted because of law-and-order challenges.

The committee called for stronger safeguards at FBR warehouses, including proper documentation, physical verification and transparent procedures from confiscation through final disposal. It directed the FIA and FBR to provide additional records and investigation reports on tobacco-related tax matters and the missing cigarette cartons.