Tax refunds amount to Rs532b: FBR

Tells NA committee about Rs220b worth of administrative measures taken in budget

ISLAMABAD:

The Federal Board of Revenue (FBR) on Thursday admitted the existence of a minimum Rs532 billion worth of tax refund claims and also conceded that Rs220 billion worth of “administrative measures” were taken in the budget.

The tax refund claims had been outstanding on account of income tax, sales tax and customs duty for the period of June 2014 to June 2019, according to a briefing that the FBR gave to the National Assembly Standing Committee on Finance.

The Rs532-billion worth of tax refunds were the minimum as the FBR did not report the claims outstanding from before June 2014 and also for the period of July 2019 to June 2020.

The admission confirms the existence of yet another circular debt, like Rs2.1 trillion in the power sector, and also affirms that the FBR’s tax collection was grossly over-reported.

FBR Member Policy Dr Hamid Atiq Sarwar disclosed that the government took Rs220 billion worth of measures in the budget, which he called administrative measures.

“Administrative measures of Rs220 billion have been taken in the budget,” said Sarwar.

The Express Tribune reported on June 12 that the government had imposed over Rs200 billion in new taxes but was not admitting it.

From June 2014 to June 2019, Rs413.5 billion of income tax refund claims had been outstanding, said FBR Inland Revenue Operations member Dr Mohammad Ashfaq. He said the outstanding sales tax refund claims amounted to Rs112 billion. Dr Tariq Huda, FBR member customs, stated that customs rebate claims amounted to Rs6 billion.

In fiscal year 2018-19, the total tax collection was Rs3.826 trillion and if we excluded Rs532 billion from it, the net collection stood at only Rs3.294 trillion. The Rs3.294 trillion was equal to just 8.6% of gross domestic product (GDP) of that fiscal year.

The FBR did not share tax refund claims data for fiscal year 2019-20. If one includes the 2019-20 estimated refund claims, the dues of taxpayers would be far higher than Rs600 billion. It is also a failure of the International Monetary Fund (IMF) that could not pick gross over-reporting of revenues. The Express Tribune had reported in April this year that the FBR was withholding a minimum Rs350 billion in income tax refunds.

The trend showed that like the Pakistan Muslim League-Nawaz (PML-N), the Pakistan Tehreek-e-Insaf (PTI) government too blocked the tax refunds to inflate its revenues.

During its five-year period, the PML-N government received Rs403.5 billion worth of income tax refund claims but did not release Rs326 billion to taxpayers, which was 79% of the outstanding claims, according to the FBR’s presentation.

During PTI’s first year, the FBR received Rs101.5 billion in income tax refund claims but did not pay Rs87.5 billion, which was 86.2% of the claimed amount, according to the presentation at the parliamentary forum. “Businessmen have serious concern over delay in the issuance of their refunds amid deadly pandemic that has adversely affected them,” said Faizullah Kamoka, Chairman of the standing committee.

However, the committee did not ask for a plan from the FBR to clear these dues.

To a question on actual tax collection from withdrawal of concessionary tax regime of the exporters, Sarwar said that the government had estimated receiving Rs70 billion due to withdrawal of SRO 1125. The net GST collection due to removal of SRO 1125 was Rs83.4 billion, said Sarwar.

Sarwar said that the exporters had filed Rs105.2 billion refund claims and out of that Rs72.2 billion were paid to them. This has left Rs33 billion balance with the FBR, which is also part of last year’s Rs3.99 trillion total tax collection.

PML-N’s MNA Ali Pervez could not get an answer to his question about the FBR’s claim of existence of $12 billion local textile market. Had such market existed, the FBR could have collected Rs250 billion after withdrawal of SRO 1125, said Malik.

To a question raised on whether there were no outstanding income tax refunds prior to 2014, Dr Ashfaq said that there could be refunds even prior to the 2014 period but their data was with the field formations. But he said that the amount may not be too high.

The standing committee also criticised the government’s decision to give Rs100 refunds by giving a supplementary grant to the FBR.

The government’s decision to give Rs100 billion refunds through supplementary grant was ethically and professionally wrong, as the refunds can only be paid out of gross tax collection, said Ahsan Iqbal, former planning minister.

Sarwar said that due to the sudden drop in tax collection in the aftermath of Covid-19, the federal government decided to protect the shares of the provinces by giving refunds through supplementary grant. “Money has been overbooked to provinces and we are thinking to get it adjusted against the provincial shares in this fiscal year,” said Sarwar.

While responding to questions on the realism of new tax collection target of Rs4.963 trillion, Sarwar said that the FBR has taken nominal GDP growth rate of 10.1% (2.1% GDP growth and 8% inflation rate).

He said that the Rs4.963-trillion collection is based on certain assumptions and if these assumptions change collection too will change.

The FBR’s numbers are not adding up and it is unnecessarily taking up burden of collecting 17% collection over and above nominal GDP growth forecasts that too are ambitious, said Dr Ayesha Pasha of the PML-N.

The FBR also promised to submit a response on the question whether FBR former chairman Shabbar Zaidi paid Rs16 billion refunds to companies that were his clients.

Published in The Express Tribune, July 10^th, 2020.

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