PM to give out two dozen tax refund cheques next week

Amount is less than 15% of what it has been withholding to inflate revenues

ISLAMABAD: Prime Minister Nawaz Sharif will distribute tax refund cheques next week among two-dozen prominent executives but the amount his government is willing to return immediately is less than 15 per cent of what it has been withholding to inflate revenues.

The government will also not pay any compensation to taxpayers for using their money for years to inflate revenues even though the law makes it binding on it to compensate people for delaying refunds.

“It has been decided to give about Rs30 billion tax refunds to only exporters this month and about two-dozen people will receive the cheques from the prime minister on Tuesday,” a senior finance ministry official told The Express Tribune on Saturday. About 6,000 refund cheques have been issued to exporters.

The government is considering adjusting about Rs18 billion refund payments against last year’s revenue collection by declaring final tax collection of 2015-16 at Rs3.112 trillion. It had earlier announced that the Federal Board of Revenue collected Rs3.130 trillion in taxes last year.

The biggest cheque the premier will give will be worth Rs100 million. The government is holding the ceremony to redress longstanding grievances of exporters regarding payment of refunds. However, the Rs30 billion refund payments will not be sufficient to resolve liquidity problems that businesses are facing due to wrong government policies.

The Rs30 billion refunds are less than 15 per cent of around Rs270 billion the government has been blocking for the last three years to inflate revenues. The exact amount of the refunds is not known but Finance Minister Ishaq Dar once admitted that Rs221 billion refunds were overdue.

It is possible the premier may announce a decision to clear all outstanding refunds but actual payments will only be made in October after expiry of the International Monetary Fund bailout by borrowing from banks.

Dar on Saturday chaired a meeting to finalise the arrangement for the ceremony. “It was decided that those claims in respect of which refund payment orders (RPO) had been issued till April 30, 2016, will be finalised by August 23,” a ministry handout read.

Flouting rules

The government decision to pay refunds against RPOs issued till June 30 is tantamount to admitting it broke the rules. Section 10 of the Sales Tax Act says that the excess amount of input tax shall be refunded to the registered person not later than 45 days of filing of the refund claim.

Sales tax rules say the government is bound to pay a certain amount in compensation where it remains unable to pay the refund within seven days of issuing RPOs. Similarly, section 171 of the Income Tax Ordinance also binds FBR to pay a certain amount in compensation on admissible due income tax refunds.

The government will not pay any compensation, as only principal amounts will be cleared, said an FBR official.

The government has already finalised a plan to borrow money from banks and pay the remaining refunds amid opposition from the IMF and tax practitioners.

Published in The Express Tribune, August 21^st, 2016.