EDITORIAL: Now that the Federal Tax Ombudsman’s (FTO’s) office has identified “significant gaps” in the non-profit organisations (NPOs) sector – including blatant tax evasion, non-filing of tax returns, withholding tax deduction statements, and misuse of approval regimes.
However, the first question that the FTO must answer is just how it was possible for 2,776 out of 4,509 registered NPOs, in a “vibrant and extensive” sector, to conveniently avoid filing returns all this time.
Apparently, a number of red flags were raised when the FTO received complaints about “delays, denials and delinquencies”, which created “unjust hurdles for law abiding entities”. And once its secretariat decided to review the entire statutory, regulatory and procedural regime governing NPOs, it found that this sector, too, was mired in rampant tax evasion.
Yet it’s much worse that the committee formed to probe this issue and present its findings in three months took more than three years to do the job. And, to date, no changes have been made to the existing rules. Surely, this typical lethargy should also be investigated because everybody knows these delays owe their origin to interest groups that break and bend the law greasing palms and finding ways to save their own hides. If the rot runs from Federal Board of Revenue (FBR) all the way to NPOs, then heads must be made to roll.
As things stand, FTO has found FBR guilty of “sheer laxity and ineptitude” and PCP (Pakistan Centre for Philanthropy), which the FBR granted NGO status of a certification agency in 2003, expanding its scope beyond mandated regulatory parameters. And, going forward, FTO has directed FBR to form yet another committee to “review and reassess the capacity and evaluate PCP’s functioning as a certification agency”.
The PCP, however, rebuts the assertion of having exceeded its mandate. FTO has also directed the committee to complete its work within three months. Now, if the past provides any guidance, this is where the matter will get buried under official files, especially as it fades from the headlines, and the said committee will only present its findings when somebody at the FTO office jolts it out of its usual slumber.
That makes it the FTO’s responsibility to ensure that this crucial deadline is met. Because that would only be the starting point of much needed corrective action. Such things go to show why the FBR always cuts a sorry face whenever the question of inadequate revenue collection comes up. And why the government must eventually rely on indirect taxes to meet its targets, crushing lower income groups in the process.
If the finance ministry and all its subsidiaries still don’t realise that the old way of doing things can no longer work, then there is little hope for the country to overcome the financial existential threat that it currently faces. IMF (International Monetary Fund), whose support and lending is crucial to avoid sovereign default itself, has made it clear that increasing revenue collection, through painful structural reforms, is key to keeping the arrangement going beyond the current SBA (Stand-By Arrangement).
This fact alone should make the country’s top-most offices take very serious note of FTO’s revelations about the NPO sector.
Copyright Business Recorder, 2023
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