Rs. 450 Billion Tax Evasion in Poultry and Tobacco Sectors: FBR Chairman

The Chairman of the Federal Board of Revenue (FBR) revealed staggering tax evasion in the poultry and tobacco sectors during a meeting of the National Assembly’s Standing Committee on Finance, chaired by Syed Naveed Qamar. The FBR Chairman disclosed that the poultry sector, which was liable to pay Rs. 10 billion in taxes, was only contributing Rs. 1.3 billion. He pointed out the significant profit margins in the sector, where a chick costing Rs. 70-80 is sold for as high as Rs. 180. He attributed this underpayment to the absence of cost accounting in income tax returns within the poultry industry. The FBR’s market intelligence indicated widespread issues in certain sectors, including poultry, where daily production ranges from 800,000-900,000 chicks. The lack of cost accounting led to substantial under-collection of taxes. The Chairman noted that when the FBR took action, the sales prices declared by the poultry sector were altered. Officials estimated that the outstanding dues from the poultry sector over the past five years could amount to Rs. 150 billion, with annual liabilities reaching Rs. 30 billion. The Chairman explained that the recent presidential ordinance regarding income tax was introduced to monitor production in these problematic sectors. This ordinance extends the authority previously available under sales tax to income tax. He clarified that there had been misinterpretations of Section 138 of the Income Tax Ordinance. He assured the committee that taxpayers have protection at three stages, and tax issues are generally identified at the tribunal level, known to both the officer and the taxpayer. Turning to the tobacco sector, the FBR Chairman revealed an estimated tax evasion of Rs. 300 billion. He stated that any cigarette without the mandatory stamp is illegal and indicated that the FBR would seek the assistance of provincial law enforcement agencies to combat the trade of illegal cigarettes. Chairman of the Standing Committee, Syed Naveed Qamar, expressed concern that the new authority granted by the ordinance could lead to increased harassment. He questioned the urgency of issuing the ordinance just a day before the National Assembly session and weeks before the upcoming budget, where such matters are typically addressed. Several committee members echoed these concerns. Officials from the Ministry of Law stated that they had received a request citing financial difficulties as the reason for the expedited ordinance. Chairman Qamar questioned why the urgency was not challenged. Chairman Qamar labeled the ordinance as a potential misuse of authority, stating that while the committee would let it pass this time, it should not be a recurring practice. Member Committee Mobeen Arif reiterated this sentiment. Chairman Qamar concluded by stating that amendments could be introduced to the ordinance once it is presented to the National Assembly.