Broadening tax base: FBR negligence tantamount to misrule: FTO

ISLAMABAD: The Federal Tax Ombudsman (FTO) has declared that the negligence and inefficiency on the part of the Federal Board of Revenue (FBR) in the discharge of duties and responsibilities for broadening the tax base is tantamount to mal-administration.

According to a recent own motion investigation conducted by the FTO on the sugar sector, it proves beyond any shadow of doubt that the field formations are not vigilant in procuring information related to unregistered buyers of sugar as per declaration in Annexure ‘C’ of monthly sales tax return. The field formations appear to be content with just whatever is being submitted in monthly sales tax return. The data of unregistered buyers are not being examined at all for the purpose of broadening of the tax net.

Similarly, in routine audits of income tax and sales tax, no effort is made to penetrate this curtain which shields the high tax potential unregistered persons.

Thus, serious negligence and inefficiency on part of the field formations of the FBR in the discharge of duties and responsibilities are evident. Therefore, the negligence and inefficiency on the part of field formations of the FBR in discharge of duties and responsibilities related to broadening of the tax base is tantamount to maladministration in terms of Section 2(3)(ii) of the FTO Ordinance.

The FTO report said that it is an admitted fact that the FBR’s field formations which hold jurisdiction over sugar mills and could enforce complete identifiable particulars of all buyers through the following legal means, still they have miserably failed in securing the said data: First, proper and timely enforcement and analysis of withholding statements, mandatory under Section 236G (Advance tax on sales to distributors, dealers and wholesalers) and 236H (Advance tax on sales to retailers) read with section 165 of Income Tax Ordinance, 2001.

These statements provide all the relevant information i.e. the name, Computerized National Identity Card Number, National Tax Number and address of each person from whom tax has been collected by sugar manufacturers. Second, proper enforcement of Sections 22 and 23 of Sales Tax Act, 1990 (Records) read with Sales Tax Rules which obligates registered person making taxable supplies to maintain the records of supplies made, indicating the description, quantity and value of goods, name and address of the person to whom supplies were made and the amount of the tax charged. No distinction has been created between supplies made to registered or unregistered persons.

Third, the department has full access to various bank accounts of sugar mills and therefore the actual buyers can be tracked through analyzing major credits appearing in the said A/Cs. But in routine audits of this sector by the FBR, no effort was made to penetrate this corporate veil with the help of Section 176 of the Income Tax Ordinance.

The facts supra clearly establish that the RTOs/LTOs having jurisdiction in the case of sugar mills were not vigilant and competent enough to enforce the “unregistered buyers” information through withholding statements u/s 236G and H of Income Tax Ordinance, 2001 and proper enforcement of Sections 22 and 23 of Sales Tax Act, 1990 (Records) read with ST Rules; Annexure “C” of the Sales Tax Return with complete identifiable particulars and action under Section 176 of the Income Tax Ordinance especially during the audit proceedings, the FTO added.

Copyright Business Recorder, 2022