ISLAMABAD: The bureaucratic hurdles created by the Federal Board of Revenue (FBR) have put foreign direct investment (FDI) worth tens of millions of dollars at stake.
Sources informed that the Track-and-Trace Program Licensee comprising AuthentixInc, AJCL Private Limited, and MITAS Ltd, a consortium was awarded a project to implement TTS in four sectors, tobacco, cement, sugar and fertiliser.
However, the bureaucratic hurdles of the FBR have jeopardised the game-changer Track-and-Trace Programme. Not only has the programme not been fully implemented thereby not achieving the desired results for the GoP and creating hurdles in discussions with multilateral lenders who want to improve tax digitisation but it has also put FDI worth tens of millions of dollars at stake.
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Recently, the Tariq Bajwa-led Inquiry Committee also came down hard on the FBR for their incompetence in the implementation of TTS.
The Bajwa-led committee report stated that the FBR was supposed to complete the project by February 2022, but litigation and court stays on implementation, bureaucratic inefficiencies, and incompetence of FBR officials delayed the implementation of TTS.
A project director with a small team will not be able to deliver unless the whole of FBR, even the whole of government approach is adopted, the report said.
The report also states that the FBR’s IREN, an enforcement unit consisting of 87 staff members, virtually has no physical presence in the ground due to which illicit and smuggled cigarettes are openly available in the market.
In addition, this has also led to waning interest in the industry in the tobacco and cement sector, while major revenue leakages links to smuggled and non-duty paid products being sold in the market.
The report disclosed that the number of production sites and lines in notified sectors as given in the IFL and the SDA were subsequently, found to be less than actually on the ground, which illustrates the extent of the unawareness of the FBR as to the production landscape in the country.
For instance, the production lines were over 200 in the cement industry, whereas, the FBR just mentioned 50 in tendered documents, which shows an increase in production lines by a factor of four in the cement sector alone. According to sources, the Licensee has put up change orders in line with the provisions in the contract, pertaining to additional cost associated to outfit these additional lines, which are yet to be addressed by the FBR since two years.
Meanwhile, the FBR also directed the Licensee to install the system on one production line each in the cement factory instead of rolling it out across the complete cement sector.
Commenting on this matter, Tariq Bajwa-led committee stated that the solution efficiency is severely eroded by the continued operations of those production lines where the system is not implemented, and was of the view that FBR may direct Licensee to implement TTS across the complete cement sector.
“Contractual lapses on FBR’s side weakened the project governance and oversight and resulted in an inordinate delay in the resolution of outstanding issues between the Licensee and FBR.”
The committee believes that despite the fact that the current technology solution has not achieved full results due to incomplete implementation, termination of the contract at this stage will trigger litigation and lead to prolonged delays in the implementation of the TTS, thereby, resulting in revenue slippages and evasion considering especially that FBR has not developed any in-house capacity and fallback plan to take over the system in case of termination of the contract“, the report said.
The FBR has acknowledged the achievement of TTS on various forums and the crucial role that it has played in bringing overall transparency in the production data making it easier to digitally monitor the production, and has reduced suppression of production which minimises the evasion.
However, it is imperative to ensure that the revenue authorities ensure complete rollout across the existing sectors, expand it to other sectors of the economy and enhance enforcement practices to avail the actual benefits of TTS and enhance tax revenue generation in the long run.
Copyright Business Recorder, 2024
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