Govt plans changes to key FBR posts

Move comes after NAB probe into tax relief for telecom firms.

ISLAMABAD:

The government is planning a major reshuffle in the tax machinery following an investigation by the National Accountability Bureau (NAB) that stopped Rs47 billion in tax relief to cellular companies at the eleventh hour.

However, the plan also includes consideration to bring back a controversial tax man, who had earlier been ousted from the Federal Board of Revenue (FBR) due to his role in figure fudging in 2011, said sources privy to the development.

The move comes following the departure of former FBR chairman Mumtaz Haider Rizvi, who was forced to go on leave after NAB – the anti-corruption watchdog – stopped the FBR from waiving Rs47 billion in sales tax liabilities of cellular operators.

Under the reshuffle, the government is planning to remove Member Inland Revenue Shahid Hussain Asad and Sales Tax Chief Abdul Sattar Aora, the officials whose names NAB has asked to be placed on the Exit Control List (ECL) along with Rizvi. Chief commissioners and commissioners of regional tax offices, who failed to achieve their targets, may also be replaced, said the sources.

Last year, the FBR missed the revenue collection target by Rs75 billion, according to the State Bank data.

While the move to make changes to key posts seems to have some merit, there are attempts to appoint Asrar Rauf again as member inland revenue in place of Shahid Asad. Rauf is currently serving as secretary in charge of the Capital Administration Development Division and is due to retire on September 5.

Rauf had been placed on a low-key post after his role in overstating tax collection to the tune of Rs42 billion when the FBR failed to achieve the 2010-11 revenue target of Rs1.588 trillion.

Sources said Rauf’s name was under consideration in the Prime Minister’s House. However, according to them, new FBR Chairman Ali Arshad Hakeem was resisting the move. Hakeem was not available for comments.

The sources said another front runner for the post is Ijaz Hussain Shah, who is serving as director general of the Large Taxpayer Unit Islamabad.

FBR justifies tax relief

The FBR has defended its decision to waive taxes of Rs47 billion. According to FBR officials, it is not for the first time that the FBR has invoked Section 65 to settle a tax dispute provided the taxpayer is ready to pay the tax in future. So far, it has applied the clause in 25 cases including five-star hotels, which got excise duty waived on sale of liquor, documents available with The Express Tribune revealed.

The FBR officials argued that the duty relief did not inflict such a loss to the kitty as NAB was claiming. They pointed out that telecom companies provide interconnect services to each other, but do not pay federal excise duty on the service charges paid by them on the grounds that FED is paid on the total amount billed to the customer for the taxable service including ‘interconnect charges’ and no separate FED is required to be paid by the companies.

Moreover, even if a telecommunication company is forced to pay FED separately on the transfer of money to the other company on account of ‘interconnect charges’, the FED paid becomes an adjustable input tax. The government is not going to benefit a single rupee from this case, according to the officials.

Published in The Express Tribune, July 26^th, 2012.