FBR uses coercive measures to recover tax from GHPL
It presumed liability of Rs2.9b by assessing company’s turnover at Rs12.1b
PHOTO: Reuters
ISLAMABAD:
The Federal Board of Revenue (FBR) has used coercive measures against a state-owned company, forcing it to pay Rs1.12 billion in advance tax after the authorities failed to increase revenues through lawful means.
On September 29, a day before the close of first quarter of fiscal year 2016-17, the FBR issued first notice at 12.30pm and directed Government Holdings Private Limited (GHPL) to deposit Rs1.12 billion in advance tax by 4.30pm, showed the FBR’s legal notice. The FBR’s documents revealed that the company received the notice at 2.40pm.
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The tax bureau threatened that if the tax was not deposited before the close of banking hours, the company’s accounts and movable and immovable assets will be seized to recover the tax.
It also said the FBR may arrest the principal officer of the company to recover the amount.
Riaz Khan, Deputy Commissioner of Large Taxpayers Unit (LTU), Islamabad, had issued the notice. However, sources in the FBR said sending such a notice was not possible without taking top hierarchy of the FBR headquarters into confidence.
Additionally, the FBR involved the petroleum ministry and managed to get Rs900 million from the company by pressurising it, said the sources.
“An overzealous officer issued the notice,” said Shahid Islam, Managing Director of GHPL, while confirming the development.
He said when the officer issued the notice, the company’s tax advisers were in a meeting with the FBR people, showing lack of coordination among them. Islam said the matter had now been resolved.
At a time, when Riaz Khan was issuing the notice, the FBR was facing the gigantic task of collecting Rs110 billion in a single day to meet its first-quarter revenue collection target of Rs686 billion.
The FBR could pool only Rs625 billion, falling short of the quarterly target by Rs61 billion and registering a mere 4.1% growth. The shortfall further widened in October, reaching Rs82 billion.
However, the FBR presented wrong revenue collection figures in a meeting of the Senate Standing Committee on Finance last week, claiming it had achieved 5.9% growth.
It did so by understating the previous fiscal year’s first-quarter collection by Rs10 billion to Rs590 billion.
The FBR was of the view that GHPL, an oil and gas exploration company, owed Rs2.9 billion in advance income tax but the company paid Rs1.8 billion only. However, there is a set procedure in the law and rules to recover the disputed amount, which was not followed.
The FBR estimated the liability of Rs2.9 billion by assessing that the company’s turnover in the first quarter would be Rs12.1 billion. In the last fiscal year, the company had paid Rs12.8 billion in income tax.
A judgment by the Islamabad High Court in OGDC’s case has stopped the FBR from assuming advance income tax liabilities, saying such calculations are against the spirit of Section 147 of the Income Tax Ordinance. There is a formula for working out the advance income tax.
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It was not a unique case as companies in the oil and banking sectors had been forced to pay advance tax in the past. The FBR took around Rs250-billion advance in the last fiscal year.
“It is a case of maladministration on the part of concerned tax officers and action should be taken,” admitted Dr Mohammad Iqbal, the FBR spokesman.
GHPL was established in 2000 and was 100% owned by the government. The company was created to separate the commercial and regulatory functions. The government’s shares in upstream petroleum joint ventures were transferred to GHPL.
Published in The Express Tribune, November 20th, 2016.
The Federal Board of Revenue (FBR) has used coercive measures against a state-owned company, forcing it to pay Rs1.12 billion in advance tax after the authorities failed to increase revenues through lawful means.
On September 29, a day before the close of first quarter of fiscal year 2016-17, the FBR issued first notice at 12.30pm and directed Government Holdings Private Limited (GHPL) to deposit Rs1.12 billion in advance tax by 4.30pm, showed the FBR’s legal notice. The FBR’s documents revealed that the company received the notice at 2.40pm.
Revenue: President stresses on expanding tax base
The tax bureau threatened that if the tax was not deposited before the close of banking hours, the company’s accounts and movable and immovable assets will be seized to recover the tax.
It also said the FBR may arrest the principal officer of the company to recover the amount.
Riaz Khan, Deputy Commissioner of Large Taxpayers Unit (LTU), Islamabad, had issued the notice. However, sources in the FBR said sending such a notice was not possible without taking top hierarchy of the FBR headquarters into confidence.
Additionally, the FBR involved the petroleum ministry and managed to get Rs900 million from the company by pressurising it, said the sources.
“An overzealous officer issued the notice,” said Shahid Islam, Managing Director of GHPL, while confirming the development.
He said when the officer issued the notice, the company’s tax advisers were in a meeting with the FBR people, showing lack of coordination among them. Islam said the matter had now been resolved.
At a time, when Riaz Khan was issuing the notice, the FBR was facing the gigantic task of collecting Rs110 billion in a single day to meet its first-quarter revenue collection target of Rs686 billion.
The FBR could pool only Rs625 billion, falling short of the quarterly target by Rs61 billion and registering a mere 4.1% growth. The shortfall further widened in October, reaching Rs82 billion.
However, the FBR presented wrong revenue collection figures in a meeting of the Senate Standing Committee on Finance last week, claiming it had achieved 5.9% growth.
It did so by understating the previous fiscal year’s first-quarter collection by Rs10 billion to Rs590 billion.
The FBR was of the view that GHPL, an oil and gas exploration company, owed Rs2.9 billion in advance income tax but the company paid Rs1.8 billion only. However, there is a set procedure in the law and rules to recover the disputed amount, which was not followed.
The FBR estimated the liability of Rs2.9 billion by assessing that the company’s turnover in the first quarter would be Rs12.1 billion. In the last fiscal year, the company had paid Rs12.8 billion in income tax.
A judgment by the Islamabad High Court in OGDC’s case has stopped the FBR from assuming advance income tax liabilities, saying such calculations are against the spirit of Section 147 of the Income Tax Ordinance. There is a formula for working out the advance income tax.
Revenue cases: Expats’ cases to be decided in 3 hearings
It was not a unique case as companies in the oil and banking sectors had been forced to pay advance tax in the past. The FBR took around Rs250-billion advance in the last fiscal year.
“It is a case of maladministration on the part of concerned tax officers and action should be taken,” admitted Dr Mohammad Iqbal, the FBR spokesman.
GHPL was established in 2000 and was 100% owned by the government. The company was created to separate the commercial and regulatory functions. The government’s shares in upstream petroleum joint ventures were transferred to GHPL.
Published in The Express Tribune, November 20th, 2016.