FBR investigates Re1 RPO

Authority will probe whether refund payment order of Re1 is scam or glitch

ISLAMABAD:

The government’s decision to charge 17% sales tax on textile goods from July last year and then returning money to exporters without first putting a fully automated refunds system in place has created a unique situation - the Re1 RPO.

The parliament members and businessmen call the (Refund Payment Order) RPO of Re1 a “scam” but for the taxmen it is a technical glitch, which was the result of a manual-cum-automated tax refund system, put in place in July last year.

The RPO is issued to a taxpayer after his sales tax refund amount is admitted by the Federal Board of Revenue (FBR) and the instrument is used to claim the money.

An investigation by the intelligence and investigation wing of the FBR will determine in coming days whether it was fraud or a simple technical glitch. But the issue has established two facts.

Firstly, the FBR never had Fully Automated Sales Tax Electronic Refund, known as FASTER system, in place and the government haphazardly put in place a tax refund system that was never reliable.

Secondly, some elements in the Pakistan Revenue Automation Limited (PRAL) - the FBR’s information technology backbone, were left without punishing when in past they tried to exploit such technical glitches in their favours. These people are at the centre of this new controversy.

In July 2019, the government had taken a big step and withdrew zero-rating facility of the exporters. They were promised to payback their refunds within 72 hours. This marks the beginning of unending troubles for the exporters and an opportunity for few to make illegal money in the FBR, giving birth to Re1 RPO glitch or scandal.

“I have assigned this task (to investigate RPO Re1) to director general Intelligence of Inland Revenue Dr Bashirullah,” said FBR Acting Chairman Javed Ghani.

In June, about 1,250 RPOs for paying refunds were processed under FASTER system and at least 150 RPOs or 12% were worth Re1, highly placed sources told The Express Tribune. The total refunds that were processed in June stood at 1,941, said the sources.

An amount of Rs181 million was involved in these 150 cases.

For instance, in one case the refund claim was Rs60 million but the FBR issued worth Re1 RPO. The company was approached by someone from within the FBR and offered to roll back the RPO in return of certain share in the refund claims, said the sources.

When the government had withdrawn the zero-rating facility, Adviser to Prime Minister on Finance Dr Abdul Hafeez Shaikh claimed that the RPO if the amount found admissible will be generated and the same will be electronically communicated direct to the State Bank of Pakistan, within 72 hours of submission of claim, for onward advice to the respective banks for credit into the notified account of the claimant.

PTI’s member parliament and chairman of National Assembly Standing Committee on Finance Faizullah Kamoka has criticised the FBR for its handling of the exporters’ tax refunds. Kamoka, who had also attended the FBR headquarter meeting, argued that if the exporters refunds payments system was fully automated then why there was pendency even after 72 hours of filing of the claim.

The FBR claims that the RPO Re1 is the result of the system failures and then they say there are shortcomings, said Kamoka while talking to The Express Tribune. The member parliament said that those who give bribes to the FBR their refunds are issued.

The issuance of Re1 RPO is not a fraud, said Dr Mohammad Ashfaq, Member Inland Revenue Operations of the FBR. The issues arose in the past in cases where there was no export during a month and then there was export in the next month, FASTER rejected the claim in which there was no export, said Ashfaq while explaining the issues. This also resulted in issues with claim having export due to non-availability of brought forward inputs from rejected claim, he added.

FASTER was upgraded to process claims with no export to generate Re1 RPO to allow carry forward of inputs to next month. During economic shut down a large number of persons did not file returns, hence, input in such cases was deferred and system generated Re1 claims, said the member.

Dr Ashfaq said that he has directed to put in place fully automated tax refund system within 15 days, conceding that there were issues in the FASTER. He said that about 5,000 refunds claims that were pending because of any reason have been ordered to be cleared.

The government was making all-out efforts to address the refunds issues being faced by the taxpayers and things improved during past few weeks, said Dr Ashfaq.

The directorate general of intelligence & investigation has started preliminary inquiry and formal inquiry would be launched very soon, said an official of the intelligence wing. There were incidences where Re1 RPOs were issued but this has to be determined whether it was because of human intervention in the system or some electronic glitch, said the official.

In past, a joint investigation team of the FBR had implicated a senior officer of PRAL on charges of corruption but he was never removed. Instead of penalising him, the PRAL officer was given four bonuses, two of the previous year, and another important position in the PRAL.

The employees of the PRAL had also complained to the FBR chairman about illegal rewards and corrupt practices in the information technology company of the FBR, according to the record seen by The Express Tribune.

Published in The Express Tribune, August 29^th, 2020.

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