FBR issues

The Federal Board of Revenue (FBR) has been in the news for all the wrong reasons lately. The much-touted Track and Trace System (TTS) to control illicit tobacco trade has been delayed; before that, the award of the TTS itself became controversial when some bidders alleged lack of transparency in the contract award of the TTS and reported it to the court. The FBR chairman’s leave also became a topic of speculations. The issues arising from the turnover tax on industry and trade related to tyres, mobile phones, ghee, sugar, pulses, cement, fertilizer, electronics, yarn, iron, steel, paper, automobile and other sectors have also been highlighted by news reports as major issues between the FBR and the industrial and trade sector of the country. Then the FBR also took a controversial step by drastically reducing both sales and income taxes at import stage of smartphones valued at Rs15, 000 or below.

This reduction is likely to discourage local manufacturing of these phones within the country. We know that other countries in the region such as Bangladesh and India are encouraging local manufacturers to produce smartphones locally but in Pakistan, the FBR’s policies are adversely affecting the local manufacturing potential. In December last year, a major controversy emerged when the textile industry expressed its concerns about misrepresentation of facts by the FBR. The imposition of sales tax on previously zero-rated sectors became a bone of contention. Then the news appeared that the FBR in the first six months of the current fiscal year paid Rs98 billion refunds as opposed to Rs31 billion in the previous year. The FBR also issued refunds, through the FASTER system, worth Rs11 billion against claims of Rs15 billion. According to reports, over invoicing and under invoicing is another issue that the FBR has been unable to tackle. In the last week of December 2019, the FBR in an abrupt move notified fresh jurisdictions of commissioner appeals and annulled all the jurisdictions issued in the past.

Finally, the Supreme Court of Pakistan on January 29 warned the FBR not to “play games”. The Supreme Court has asked the FBR what it has done to recover Rs870 million, and chided the FBR for presenting old inquiry reports in cases of malpractices. In the same hearing, the court ordered a probe against the deputy commissioner sales in an illegal tax refunds case. The court was rightly concerned about the loot of Rs874 million from the national exchequer and expressed its displeasure at the way the FBR is handling this corruption. The court has raised serious questions, which call for a serious rethinking in the way the FBR is working, especially to control its own malpractices.