Govt considers stopping tax collection for FBR

Provincial govt says revenue board is unilaterally deducting funds from its accounts

KARACHI: The motor vehicle registration wing of the Sindh Excise and Taxation Department may not collect withholding taxes on behalf of the Federal Bureau of Revenue (FBR) anymore, because the latter has been unilaterally deducting funds from the provincial government's accounts, said participants at a meeting on Thursday.

During the meeting, Sindh Chief Minister Murad Ali Shah was apprised that the FBR was only engaging the provincial government for returning over Rs8 billion it had unconstitutionally deducted from the provincial government's account, but it did not intend to refund the amount.

It was mentioned during the meeting that from 2012-13 to 2016-17, the FBR had unconstitutionally deducted over Rs8,054.5 million from the provincial consolidated fund account. The provincial government has been raising the issue of the refund at different forums but the FBR seemed to be adamant not to return the deducted money.

Shah was informed that in 2012-13, the FBR withheld Rs695.235 million inaccurately from the Sindh government's account without waiting for reconciliation. An appeal was filed and the FBR appellate authority itself gave the verdict in favour of the government but the amount has not yet been refunded.

In 2014-15, the FBR increased the withholding tax on vehicles without waiting for its recovery and deducted Rs86.3 million in advance, which is still to be recovered, it was added.

The FBR created a demand in 2015-16, based on an 'unauthentic' news report, that the motor vehicle registration wing had registered 1,473,714 vehicles between July 7, 2015, and April 30, 2016, though only 79,858 vehicles were registered during the said period, said participants at of the meeting. The FBR, without reconciling the numbers, unjustifiably deducted Rs6,127.1 million, they said.

In 2016-17, the FBR created yet another exaggerated request on the pretext of withholding tax recovered from registered vehicles from May 1, 2016, to June 30, 2016, and once again, without waiting for reconciliation, they subtracted Rs294.89 million on June 14, 2017, they alleged.

In 2016-17, the audit by the Sindh auditor general was conducted, wherein it emerged that the Sindh accountant general had failed to recover an amount of Rs76.87 million from vendors of the excise and taxation Department. The audit observed that the FBR should recover the amount; but instead of recovering the amount from the vendors, the FBR deducted the said amount from the Sindh government's account.

The chief minister was told that appeals had been made at the relevant FBR forums but to no avail, as the matter was still pending. The chief minister said that the government was recovering the withholding tax on behalf of the FBR, which meant that the government was just being deprived of revenue for the excise and taxation department's services for the revenue board.

Shah proposed to tell the FBR to establish its counters at the motor vehicles registration wing and collect the withholding tax itself.

"We are fed up with their attitude and may not be able to provide them service anymore," said the CM, directing the excise and taxation department to prepare a summary for the cabinet to discuss the matter and resolve it once and for all. 

Published in The Express Tribune, February 7^th, 2020.