'Chinese contractors, sugar millers withdrew huge cash from banks during my tenure': ex-FBR chief

ISLAMABAD: Former chairman Federal Board of Revenue (FBR) Shabbar Zaidi said that during his tenure as the board's chairman, the highest amount of cash withdrawals from bank accounts have been made by the Chinese contractors and sugar mills.

Speaking as a guest in "Paisa Bolta Hai" of Aaj News with Anjum Ibrahim on Sunday, he said that the withholding tax on cash withdrawal from banks by non-filers was imposed with the purpose of identifying persons involved in big banking transactions and payments

However, the FBR has used it as revenue measure and not used for identifying persons behind big transactions. During his tenure as the FBR chairman, he checked data of big transactions of cash withdrawals from bank accounts.

The data revealed that the major withdrawals were related to the sugar mills and the Chinese contractors. Former Special Assistant to Prime Minister on Revenue Haroon Akhtar endorsed the viewpoint of Shabbar Zaidi that the FBR was unable to use this provision for the documentation of the economy.

Zaidi said that there is nothing wrong in the Tax Laws (3rd Amendment) Ordinance, 2021. First, the major amendment is related to the digital payment, which has two parts: First, digital payment and second, disallowance of expenditure from the bank account, which has not been declared with the FBR.

The amendment now proposed is the continuation of an earlier one introduced by the Finance Act, 2021. In the earlier amendment all entities are required to declare the bank account that is used for business purposes.

Presently, there are around four Crore bank accounts, but only 80,000 are declared as business accounts. There is a substantial number of undeclared bank accounts through which huge business transactions are undertaken without reflection in the taxation system.

The digital payment should be defined so that the payer and payee trail must be available. The procedural aspects of the digital payment need to be corrected.

Moreover, there are 4.5 Lakh electricity - industrial and commercial consumers but only one Lakh are registered with the sales tax department. Now, the remaining 3.5 Lakh are required to be registered with the tax department.

Explaining reasons for his resignation as chairman FBR, Zaidi said that he had full support of the prime minister and he had access to all relevant organisations. The prime minister never refused any of my proposals, he said.

However, Pakistan is working under all kinds of mafias and anyone who is fighting against the mafias, including the prime minister, needs a lot of force and commitment, he said.

He termed the traders and retailers as a 'blackmailer mafia', which needs to be fixed. The tax advisers should also work with these mafias.

"Being FBR chairman, I had two major fears. I was very much afraid of the Press. The Press has pressurized me and my views were wrongly presented," he said.

Zaidi said: "I was required to sign a very big contract for an IT project worth $400 million for upgradation of the IT system of the FBR".

He said that, "I categorically informed the prime minister that I am not ready to give approval of the IT contract worth $400 million because I have seen issues in the implementation of the track and trace system". I firmly believe that anyone who wants to do something in good faith for the country, he would be standing in front of the courts after his retirement/career, he said.

He strongly pleaded that the government must bring the Pakistan Revenue Service (PRS) to correct the tax system of the country. Without the PRS, reforms cannot be implemented in the FBR.

In October 2019, the prime minister approved a plan for restructuring of the FBR, which was strongly resisted by the bureaucracy and other systems. The bureaucracy did not want to approve this plan of restructuring, Shabbar Zaidi added.

Haroon Akhtar stated that new provision to enforce payments by the companies through a digital mode would take some time. The medium and large companies might be able to do it but a number of small and big suppliers are presently not ready for this.

The FBR has to give extension for implementation of the payments through the digital mode. Akhtar stated the Tax Laws (3rd Amendment) Ordinance, 2021, is a bold step of the government, especially its promulgation two years ahead of the elections. When you cut the electricity or gas connection of the general public, it would erode the vote bank of the political government. As compared to harsh steps of arrest, discontinuation of electricity and gas connections are comparatively soft steps.

The existing taxpayers cannot be further squeezed and action under the Ordinance must be taken against the non-filers and those not appearing on the Active Taxpayer List (ATL).

Haroon apprehended that the increase in the discretionary powers of the tax officials under the new Ordinance may result in harassment and corruption in the field formations.

About the NADRA's powers to calculate tax through artificial intelligence, Akhtar said that the FBR cannot win cases in courts on the basis of tax perceived on the basis of artificial intelligence. The court needs hardcore evidence like data of utilities consumed and property/banking transactions of non-filers. The job was supposed to be carried out by the FBR, which now NADRA has been assigned to do.

However, a Tax lawyer Waheed Shahzad Butt stated that the government must ensure to fix the tenure of the head of the revenue authority. During the last three years, six FBR Chairman have been changed and Dr Muhammad Ashfaq Ahmed is the seventh chairperson of the FBR.

He said that the documentation measures introduced through the Ordinance would force the non-filers to file returns to avoid extra penalty.

Waheed Shahzad Butt added that despite all kinds of IT tools and data available with the FBR, the mindset of the tax collector needs to be changed. The FBR must do accountability of the tax officials involved in wrong assessments of the taxpayers.

Copyright Business Recorder, 2021