The complacency of tax authorities has resulted in a revenue loss of Rs13 billion to the government, as only 87,000 tonnes of tea was legally imported out of the total domestic demand of 200,000 tonnes during the last fiscal year.
An official source said that the failure of the Federal Board of Revenue (FBR) to curb the unabated smuggling of tea under the Afghan Transit Trade agreement, which increased to 110,000 tons during the last fiscal year, caused a massive revenue loss of Rs13 billion to the national exchequer.
He explained that on legal imports, the import duty and sales tax on tea amounted to Rs116,200 per tonne. The revenue collection on legal tea imports was Rs10.1 billion during the last fiscal year. Tea consumption in Pakistan is assessed at 1 kg per person per annum.
The massive taxation on a consumer product of daily use has forced consumers to look for cheap alternates. The smugglers enjoy a massive difference of Rs90,000 per tonne after bribing officials Rs25,000 to 30,000 per tonne. They provide cheap alternates by mixing unhealthy materials in their non-branded teas.
A World Bank report on taxation issues in Pakistan had identified that there was revenue leakage of Rs600-800 billion annually at the FBR. The complacency of tax authorities has failed to curb the black tea imports to Afghanistan, who only consume green tea.
The failure of the government to address the issue by reducing the duties has led all the multinational and national brands of tea on the verge of collapse. One of the leading tea brands has closed its one unit. They have told the government in clear terms that if the tea smuggling was not controlled then they would close down, the source said.
