Daily Times

The ACT Alliance calls for an immediate, comprehensive, and across-the-board implementation of the Track and Trace System (TTS) as Prime Minister Muhammad Shehbaz Sharif reaffirms commitments to stringent tax enforcement. Despite the system’s introduction in 2019, the promises of full implementation by December 2023 have faltered, revealing a critical lapse in our fiscal management strategy.

The recent cabinet meeting chaired by Prime Minister Sharif underscored the dire state of tax evasion and illicit trade, with the Federal Board of Revenue (FBR) failing to effectively deploy TTS across vital industries such as cement, sugar, and tobacco.

The under-utilization of TTS has allowed a significant portion of local manufacturers to remain unchecked, leading to substantial losses. For instance, two tobacco companies holding 42 percent of the market share contributed Rs173 billion in taxes in FY 2022-23, while over 40 local manufacturers, controlling a 58 percent share, paid a mere Rs3 billion.

Mubashir Akram, National Convenor of the ACT Alliance, expressed deep concern over TTS’s selective and inadequate enforcement. “Without equitable and transparent tax collection and enforcing TTS on all large-scale manufacturers, the government will struggle to meet its financial targets,” stated Akram. “This continued oversight not only jeopardizes our fiscal health but perpetuates cycles of deprivation and poverty among our citizens.”

In light of revelations from the Prime Minister’s address, it is evident that even essential tools like scanners have not been acquired, further hampering regulatory progress. The stark reality is that while only 26 out of 100 cigarette brands surveyed carried the required tax stamps, an overwhelming majority flout regulations, contributing to an illicit trade that costs the national exchequer over Rs300 billion annually in the tobacco sector alone.

The meeting also highlighted that the TTS, a structural benchmark set by the IMF, has been treated more as a procedural check-box than a genuinely operationalized system. The lack of data analysis and practical application of the extensive data collected through TTS illustrates a broader enforcement and utilization issue within Pakistan’s regulatory framework.

“The time for well-staged announcements without substantive action has passed. We need robust, cross-sectoral enforcement strategies extending from manufacturers to retailers,” Akram added. “The potential of TTS to significantly impact Pakistan’s fiscal health remains unrealized, continuing the cycle of missed tax collection and regulation enforcement opportunities.”

The Prime Minister’s directive for reshuffling the FBR leadership signals a step towards accountability. However, ACT Alliance emphasizes that continuous oversight is vital for these efforts to result in sustainable improvements. Addressing systemic issues, enhancing operational capabilities, and fostering a motivated workforce are essential for realizing the government’s fiscal goals.

As Pakistan faces significant societal challenges, with 20 million citizens homeless, over a third of the population facing food insecurity, and 26.2 million children out of school, the need for recovered revenues is more pressing than ever. Trans-formative change through effective fiscal management can significantly alleviate these crises.