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November 27, 2020

FBR’s electronic monitoring of products: OICCI raises questions over breach of trade secrets, coercive tax regime

National

November 27, 2020

ISLAMABAD: The Overseas International Chamber of Commerce and Industries (OICCI), comprising over 200 multinational companies, has raised serious concerns over the FBR’s decision for placing video analytic rules for electronic monitoring of products.

The OICCI has written to the FBR conveying its concerns that the decision would lead to harassment of corporate sector by burdening them with more compliance requirements. The OICCI members represent 35 different countries and 14 different sectors of trade and industry. In their letter to the FBR, the overseas chamber maintains that its members have raised serious concerns on the practicality and implementation of the recently-issued circulars S.R.O 888(I)/2020 – Real Time Electronic Access for Audit & Survey and S.R.O 889(I)/2020 – Video Analytics Rules for Electronic Monitoring of Production of Specified Goods.

They apprehend that the proposed new compliances besides burdening the compliant taxpayers with a coercive tax regime are not practical for following reasons:

1. It will compromise corporate privacy and confidentiality of trade secrets which will not be acceptable to MNCs and may lead to decisions by the parent companies that may have an adverse impact on country. Before implementation of the monitoring exercise, it is of utmost importance to have proper provisos to safeguard the taxpayer against any breach of such confidential information by FBR personnel or it may lead to unnecessary litigation.

2. Application of SRO 889 covers surveillance of Third Schedule goods’ production, where the manufacturer is already burdened with discharge of sales tax on the ‘Maximum Retail Price’. The government treasury receives sales tax for the complete supply chain from the manufacturer, therefore, such an exercise will not add to revenue collection.

3. The proposed monitoring will further burden the existing compliant taxpayers with a coercive tax regime, besides a significant increase in the cost of the companies. This is contradictory to the ‘Ease of Doing Business’.

4- The proposed SRO may become a new avenue for false cases which may disturb business continuity.

The OICCI has sought an interactive discussion of FBR with its members. The OICCI members are willing to consider some alternative measures to achieve the FBR objective without compromising on the international best practices. The proposed SROs seem to be applicable to consumer goods only and are similar to the Track and Trace System proposed by the FBR for cement, sugar, fertilizer, tobacco and beverages sectors.

The real time data sharing with the FBR will lead to company systems being vulnerable for access by anyone in the FBR which may lead to misuse of accounting, stock and destination data which are valuable for competitors. The OICCI said since manufacturing involves trade secrets, video surveillance will create a lot of unease with huge potential for data breach as many companies, especially those with international affiliations, have in place explicit IT protocols to prevent the breaches. How will the FBR ensure safety of the data being shared?

Regarding that the monitoring will tally with the total production vs. what is going out of the factory, the OICCI feels the scope of the monitoring is ambiguous. How will products under proprietary processes be protected by these SROs? The overseas chamber questioned security measures taken by the FBR to maintain security for integrity and confidentiality of information. The entire process will compromise the ease of doing business.