FBR s complacency

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The Federal Board of Revenue (FBR) has inexplicably not yet withdrawn federal excise duty (FED) on services in spite of the fact that provinces have levied sales tax on this area of revenue generating sources. Three relevant and need one add obvious facts need to be brought to the attention of the FBR officials.

First and foremost, both excise duty and sales tax are in the value-added mode in this country, hence failing to withdraw the excise duty, as and when the provinces levied the sales tax, is simply inexcusable and a reflection of the FBR s reluctance to let go of this tax. The FBR s response has been that the necessary notification is on hold and will be issued only after all concerns are resolved with all the provinces. Legally, the FBR is on a weak wicket on this issue as its failure to withdraw the FED, given that the sales tax that has been levied is tantamount to double taxation.

Second, the provinces had empowered the FBR to collect excise duty until 30th June 2011. Subsequently three provinces, excepting Sindh, empowered the FBR to collect sales tax on their behalf in return for a fee; however after a passage of more than five weeks the FBR s failure to tackle this major discrepancy is, reportedly, causing considerable confusion amongst the taxpayers.

With the deadline of August 15 fast approaching, the due date for filing sales tax returns, the filers want a simple query answered: Do they have to file excise as well as sales tax returns, a duplication that defies logic, or whether they are to file just sales tax returns? Additionally, in the case of Sindh it is not clear if a taxpayer is required to file returns with the government of Sindh or with the FBR.

And finally the Karachi Tax Bar Association recently pointed out to the Member Inland Revenue FBR that while the services of Federal Excise Act, 2005 have been transferred to the provinces, yet the FBR has not issued details of those services that would continue to be operated under the FED mode as per the Federal Excise Act.

The FBR s recent performance has come under much criticism and has cost the country considerably. The late night press conference of the Chairman FBR on 30th June, where he revealed flawed collection figures, based on gross as opposed to net collections (the refund column was found mysteriously missing for the first time ever) led him to conclude that the stalled International Monetary Fund programme would, as a consequence of higher than expected revenue collections, be reactivated. Rationalisation of the figures, an exercise that is mandatory, led to the Chairman s claim being outed and led, instead, to a widening trust deficit with the Fund. To date, the public has been informed that an investigation is under way. However, few expect any heads to roll as a consequence if past precedent is any guide.

An average Pakistani is faced with serious governance/competence issues on all fronts: the periodic eruption of political differences that are causing mayhem in Karachi; the terrorism in the northern regions of the country as well as Balochistan that is costing the lives of the poor throughout the country; the continuing energy crisis that is not only a source of extreme concern to a householder but is also causing our industries to operate at much less than capacity; the budget deficit and excessive borrowing domestically that is fuelling inflationary pressures; the mega-scams consisting of billions of rupees of loss to the national exchequer and other governance issues, including the 500 billion rupee loss attributed to corruption in the FBR, that account for the massive bail out packages to autonomous entities.

In this context, one would have hoped that the FBR at least would have developed the capacity to ensure that it issues notifications as and when they become due and focuses on improving its collections through the ending of existing anomalies and inequities in the tax structure rather than in actively increasing these anomalies.



Courtesy: Business Recorder

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