FBR serves notice to Philip Morris for evading tax

FBR authorities have caught Philip Morris Pakistan (PMP), formerly known as Lakson Tobacco Company and owned by Philip Morris International, for massive tax evasion in their imported brand of cigarettes. Federal Board of Revenue (FBR) has issued show-cause notice to PMP asking them to pay evaded tax amounting Rs300 million. Company was paying tax on import price while according to law tax should be paid on retail price. Company declared import price as retail price. Documents available with Profit reveal that scheme used to inflict this damage to national exchequer was patently simple but brazenly fraudulent. Marlboro with actual imported price of more than Rs140 was declared valued and priced by PMP at less than half its real value at Rs64; thus real reducing tax liability. No FBR official was ready to speak on record against tax evasion because of certain political pressures but confident that PMP has deprived national exchequer of million of rupees. Sources said that for past many months, FBR had been investigating this matter in order to determine mechanism adopted for evasion of duty and taxes at import stage. During this exercise, it was revealed that PMP had been evading federal excise and sales tax and other taxes through under invoicing on their import of Marlboro cigarettes into Pakistan. An official, who was also part of investigation, told Profit that it was duty evasion that had been going on for more than two years and damage inflicted was at least Rs300 million. It was shocking to learn that purpose of this tax evasion fraudulent scheme was to deliberately keep prices of Marlboro cigarette packets low thereby inflicting a huge loss to national exchequer. He said according to rules, tax is collected on retail price but PMP declared import price as retail price. “In retail price, all taxes like import price, excise duty and sales tax is included but PMP declared import price as retail price,” he said adding that the notices have been served. It is learnt that as soon as relevant officers of FBR finished their investigation, formal show cause notices were issued to PMP asking them to pay evaded taxes amounting to over Rs300 million. According to sources, PMP’s reply to these notices was found to be unsatisfactory and rather aloof which left no choice for FBR but to take stern formal action for tax evasion against PMP. Hence, a final contravention report has been issued directing its field formations to recover evaded amount along with penalties and surcharges amounting to over a billion rupees.