The Accountant General of Pakistan Revenue (AGPR) has objected to giving Rs140 billion in supplementary grants to the Federal Board of Revenue (FBR) for paying refunds, asking the government to downward adjust tax collection by the same amount to show real picture of revenues.
AGPR – the department responsible for the centralised accounts and reporting of the federal government transactions, has already adjusted the FBR’s last fiscal year tax collection by Rs100 billion in its financial statement, said sources in the Ministry of Finance.
The Pakistan Tehreek-e-Insaf (PTI) government’s decision to release Rs100 billion from budget to pay tax refunds in the last fiscal year 2019-20 and Rs40 billion in this fiscal year was not only against the General Financial Rules but also against the accounting practices, said the sources.
The revenues cannot be inflated by using grants and this was what the government did in the last as well as in this fiscal year, said the sources.
The official versions of the Ministry of Finance and the FBR were awaited till the filing of the story.
In order to sort out the issue, a meeting had also been held in the finance ministry this week but no decision has been taken. They said that the FBR was of the view that the adjustment of these grants would further lower its collection, which has already remained behind the targets.
The finance ministry was also of the view that the non-adjustments of these grants would also lead to undue payments to the provinces, as 57.5% of the FBR collection goes to the provinces under the 7th National Finance Commission award.
Read more: Exporters reject FBR’s export scheme draft
The sources said that in August last year, the finance ministry adjusted the provincial shares against the actual FBR collection but has not yet downward revised the FBR figures.
The FBR had reported its total tax collection in the last fiscal year at Rs3.998 trillion, which the sources said, the AGRP has shown at Rs3.898 trillion in its accounts.
In violation of the rules, the Ministry of Finance provided over Rs100 billion in the supplementary budget to the FBR for the encashment of sales tax and income tax refunds bonds. However, according to the rules, the supplementary budget cannot be more than the original budget, which in case of the FBR was Rs4.4 billion.
For this fiscal year, the FBR has so far reported revenue collection of Rs4.170 trillion, which is inflated by Rs40 billion due to adjustment of the tax refunds against the grants. The AGPR is now asking the finance ministry to clarify the position as it would finalise the accounts for fiscal year 2021-21 in July-August.
Refunds are always deducted from the gross collection of the type of tax to which the refunds relate and the collection reported by FBR is always the net collection excluding the amount of refunds.
The FBR has also moved a summary to get more grants from the budget to repay refunds, which the finance ministry has not yet cleared.
An official of the FBR, on condition of anonymity, said that the issue of Rs140 billion adjustment was outstanding. He said that the FBR got the grant as part of the Covid-19 relief package, which had been approved by the cabinet. The Finance Division is considering this issue at present, he added.
For the last fiscal year, the government had set the FBR target at Rs5.55 trillion and imposed a record Rs735 billion worth additional taxes. But the FBR ended up collecting Rs3.998 trillion, which too has become disputed.
The FBR has claimed that it paid Rs216 billion refunds in this fiscal year as against Rs124.8 billion during the first 11 months of last fiscal year. These included Rs188 billion sales tax refunds as compared to Rs85.6 billion in the same period of the last fiscal year.
In September last year, the government had disclosed that the outstanding tax refund claims swelled to a record Rs710 billion. Sales tax refund claims were shown at Rs142 billion while the income tax refund claims were a whopping Rs568 billion.
“The state owes Rs710 billion to its citizens,” Mohammad Ashfaq, Member Operations FBR had told the National Assembly Standing Committee on Finance. . The FBR’s tax collection by the end of last fiscal year was Rs3.998 trillion and after excluding Rs710 billion, the collection would fall to Rs3.288 trillion or just 7.9% of gross domestic product (GDP).
Ashfaq said past refund claims should be paid by the Ministry of Finance through supplementary grants as the FBR could not adjust these amounts against its current revenue collection. Notionally, these refunds have been transferred to the Ministry of Finance on June 30 of each year when the FBR gave its annual collection to the government, said the member operations, he had said.