ISLAMABAD: The advance tax on unmanufactured tobacco is only applicable on manufacturers, and has nothing to do with the growers, and the Federal Board of Revenue (FBR) is rightly considering raising the tax in the coming budget as a major documentation measure.
This was stated by tobacco farmers from Buner, Swabi, Shergarh and Yar Hussain areas of the Khyber-Pakhtunkhwa during a press conference. They said that the government was being misled by some corners regarding advance tax on tobacco manufacturing.
General Secretary Buner Growers Association Anwer Khan told media that farmers did not pay advance FED of Rs10/kg (currently) on tobacco as the amount was to be paid by manufacturers who process green leaf at Green Leaf Threshing for manufacturing cigarettes.
A farmer's job is finished after selling the tobacco to the manufacturer, after which, the manufacturer proceeds to GLT for processing of this tobacco.
In addition, he mentioned that “we are also protected by law as well, as it clearly states in the Finance Bill 2018-2019 that a farmer is not liable to pay Advance FED, which is collected at the GLT stage."
In 2018, the Pakistan Tehreek-e-Insaf (PTI) government decided to increase this advance tax of Rs10/kg to Rs300/kg in the mini budget, so to increase the cost of tax evasion for the illicit manufacturers.
Manufacturers were bound to pay this tax and it was an adjustable FED, which could be claimed later when the manufacturer would pay his final liability to the government.
However, illicit cigarette manufacturers who do not want to declare their purchases in order to evade tax, saw this as a problem, as their cost of tax evasion had increased, and they decided to use the narrative that we farmers are paying this tax, and with the use of power corridors, they ran an extensive campaign.
National Assembly Speaker Asad Qaiser was chosen to spearhead this campaign, who made a committee that included senators, senior federal and provincial ministers, ironically, few of them belonging to the tobacco business and are owners of illicit cigarette manufacturing units.
They managed to influence the decision makers and reduced this tax back to Rs10/kg, the cost of evading tax reduced, and they reverted to using proxy manufacturers/middlemen to avoid declaration of their purchases.
When asked a question about why they are concerned regarding this issue, if it does not have any affect on them, whether the advanced FED is increased or decreased, they replied that with the decrease in the advance adjustable FED on cigarette manufacturers, this reduced the cost of tax evasion for the illicit cigarette manufacturers and their sales started increasing as we have seen in the past year.
This does not only affect the government exchequer in revenues but also affects them.
When their sales start increasing, they start purchasing more tobacco and they do not give us a good rate for our produce, furthermore their payment terms are also delayed by months.
We are poor people, who survive only from the revenue, we earn from our tobacco produce, which is why we are protesting against the government taking any measure that will help increase the illicit cigarette trade.
We want legitimate businesses to rise as they contribute to the government exchequer, they give us the best rates for our produce and more, we receive our payments in few days.
Local grower Abdus Salam Bacha from Shergarh area of Mardan said that there were certain tobacco farmers who were deceptively supporting the stance of illicit cigarette manufacturers by saying that advance FED would hurt the farmers, which was not true at all.
We as farmers sell our tobacco to the manufacturers and the manufacturers process this tobacco through GLT to manufacture cigarettes.
We as farmers do not manufacture cigarettes, then why would we go to GLT for processing?
This certain group of farmers who are supporting the stance of illicit cigarette manufacturers are in fact supporting a crime, and this crime is in shape of tax evasion, which can otherwise go to the government and can be used for the betterment of this country.
We are part of an industry that can potentially give more to the government and we want it to be spent on the betterment of our areas too.
The money that is currently collected by the provincial Excise and Taxation Department in shape of Tobacco Development Cess is not spent on us, these illicit manufacturers all belong to our areas in KP, they take vote from us, however, they are earning billions of rupees but they have never spent a single money on our areas and our development.
He said that the government was considering increasing this tax to more than Rs500/kg in the upcoming budget.
The tobacco mafia has again initiated this malicious campaign and are trying to mislead the government by using the same tactic.
The responsible tobacco farmers want to convey, that the government is moving in the right direction, and we want to say this loud and clear that that advanced adjustable FED on GLT is not a burden on farmers as this tax is paid by the cigarette manufacturers, local farmer, Zubair Khan told journalists.
The government should increase this tax to Rs500/kg as we will get to do business only with the multinational companies who have always abided by the law and have never done any wrong to us.
We will applaud the government's decision to increase this tax back to Rs300 per kg or increase it to Rs500/kg in the upcoming budget, they added.