Federal Tax Ombudsman (FTO) Dr Shoaib Suddle has said the FTO office has forwarded some viable recommendations to the Federal Board of Revenue (FBR) for introducing changes in tax laws through Finance Bill (2010-2011) with a view to removing distortions from the taxation system.
In an exclusive interview with Business Recorder, the FTO elaborated that his office has made these recommendations based on experience of cases involving complicated tax issues to the FBR. Citing an example, he said that taxpayers of Gilgit-Baltistan had approached the FTO for the refund of tax deduced on mobile phone SIMS. The withholding tax has been deducted at source and they wanted the refund of the paid amount. The issue has been examined and it is the Constitutional requirement that the people of Gilgit-Baltistan should not be liable to pay withholding tax on mobile phones calls.
The recommendations are related to the issues involving basic tax laws of income tax, sales tax and customs duty where amendments are required in the upcoming budget, he added.
Speaking about the performance of the office, he said the FTO office has made hectic efforts under the new initiatives to clear pending complaints. Under the new vision, the office has been able to clear over 200 pending complaints pertaining to years 2005 to 2008. During the last six months, over 600 complaints relating to 2009 have also been disposed of. Around 850 complaints pertaining to the past four years have been cleared. The FTO has set a target of March 31, 2010 for the clearance of all complaints of 2009. Presently, only 40 complaints of 2009 are pending before the office, which would be cleared by March 31. The speedy disposal of complaints is evident from the fact that the oldest complaint is only 90 days before filed by the aggrieved taxpayer.
For 2010, we have given a target to clear 60 percent of all the complaints in less than a period of 2 months, which would be accomplished as per the agreed deadline.
He said the FBR has issued refund of Rs 94 million to the complainants last year following orders of the FTO. This year, the tax department has so far issued refund of Rs 68 million to 176 complainants on the orders of the FTO.
About the jurisdiction of the FTO office, he said the office is effectively processing cases of mal-administration, which has a broader scope for investigation of cases. However, the office is not taking up cases pertaining to the 'determination of tax and interpretation of law'. The office is carefully operating within the laid down powers and jurisdiction available under the relevant law.
The FTO office works within its mandate to handle tax complaints involving issue of mal-administration such as repeated issuance of notices, delay in payment of refunds, wrong application of laws and corrupt practices of tax officials.
Asked to comment on newly introduced section 122C (provisional assessment) in the Income Tax Ordinance through Finance Amendment Ordinance, he said recourse to appeal is the basic right of taxpayer under the law. The right of appeal cannot be taken away from the taxpayers.
The FBR should avoid frivolous litigation by hiring professionals, which would address major issues in complaints handling mechanism. The resolution of key issues at the policy level would automatically redress taxpayers' grievances.
To a question on e-filing system, Dr Suddle said that it has reduced the discretionary powers of the tax officials and also reduced the number of complaints against the department. The automatic payment of refund system would also be instrumental in resolving all complaints of taxpayers.
The FTO office is also working on minimum standards of services to be provided by the FBR to check mal-administration within the tax machinery. This office also maintains the record of those officials, who repeatedly come to its notice during the hearing of cases of mal-administration against the tax department. Such officers should not work in the field formations. In cases of gross mal-administration, the FTO office is summoning these officials to hear their viewpoint. "We had issued directions to such officials to personally appear in such cases so that the other side of the story could be heard before giving a final decision," he said.
The FTO observed that the department should give compensation on delayed payment of refund to the taxpayers. It is very vital that unnecessary delay in refund payment should be avoided by the tax department. The FBR should conduct random balloting of audit.
The FTO explained in detail the initiatives and reforms to ensure speedy processing of taxpayers' complaints and timely implementation of the recommendations by the Federal Board of Revenue (FBR).
He said the FTO office would constitute 'taxpayers' advisory committee' to incorporate viable inputs of stakeholders for providing speedy justice to the taxpayers. "The law provides to set-up 'taxpayer's advisory committee', which would be made operational to have presentations of stakeholders from all over the country. The recommendations of the committee would be implemented to facilitate the taxpayers," he added.
Around 20 percent of complaints have been filed by the taxpayers registered with the sales tax department. Nearly, 15 to 16 percent complaints were filed against the customs department. Over 80 percent of the complaints relate to the non-issuance of refund and delay in its payment. The nature of complaints included technical issues like 'Sales Tax Automated Refund Repository computer system' (STARR) for which recommendations have been made to the FBR.
Responding to a query, Dr Suddle said the FTO office has to work independently, impartially and transparently for which a lot of emphasis has been laid on its own accountability and efficiency.
The FTO office is also working on a new project for online connectivity with the FBR to expedite implementation of the FTO orders and finalisation of complaints. Through the proposed arrangement, the FTO office will be able to get the FBR response the same day.
The real challenge is to enhance the capacity of the officers of the FTO office and various steps have been taken in this regard. The officials have been sent aboard for training purposes while the office is working on its public outreach awareness programme.
About his experience of Sweden, he said the concerned ombudsman of Sweden has received only 4 complaints of taxpayers per year, which is a remarkable achievement. The best international practices would be followed to substantially reduce complaints.
Generally speaking, people are not aware of the type of work we do. Taxpayers should know that the office is being designed to investigate, rectify and redress taxpayers' grievances against the tax collectors. The complaints could be received from any source including individual taxpayers, the President, Prime Minister and other higher authorities.
He said the FTO office is the most important department for providing speedy relief to the aggrieved taxpayers against the mal-functioning of the tax department. In this connection, we have taken steps to streamline monitoring process to ensure that the directions given to the FBR are promptly implemented. In this regard, the FTO office and the FBR Legal Wing are co-ordinating to resolve tax issues amicability. Greater co-operation between the FBR and the FTO would result in better administration of taxes, improvement in revenue collection and reduction in tax evasion.
The FTO said that the level of complaints would be substantially reduced with the help of information technology and improvement in the processes. If system problems are being addressed effectively, it would automatically reduce complaints.
Sharing some major initiatives to improve working of the FTO office, he said that the FTO has withdrawn the condition of submitting affidavit for filing of compliant. Now, a taxpayer can file compliant on a paper under the simplified procedure. The plans for 2010 include provision of real time e-filing and management of tax complaints and proposing to the government the Taxpayers Bill of Rights, violations of which will clearly constitute mal-administration. The programme would raise awareness of the Taxpayers Bill of Rights among the general public.
There is an adequate need to organise the department's internal complaint handling mechanism on professional lines so that the complaints be effectively and promptly handled by the tax department.
He said that the FTO is processing complaints, which are being mishandled by the department. The purpose of the whole reform process is to dispose of complaints without any expense to the taxpayers. The corner-stones of our reforms are to provide inexpensive relief to the taxpayers.
Dr Suddle explained that the FTO office has tremendous potential to provide speedy justice to taxpayers by expanding its outreach. Big companies and corporate entities have hired services of reputed chartered accountant firms or lawyers. The taxation disputes mainly relate to small and medium size taxpayers. It is necessary to familiarise the general public about the FTO office as many small taxpayers are not aware about the existence of this office. If the tax administration is more credible, the collection of taxes would be easy and it would plug in the loopholes in the taxation system.
The FTO office would ensure that steps are taken to improve the internal working of the FBR and minimise injustice to the taxpayers. The FBR should make its own officers accountable and provide new services to taxpayers. The mindset of the tax officials could be changed through proper incentive packages on which the FBR is already working to provide proper wages to the tax officials. Secondly, the FBR can implement an internal accountability mechanism to make tax officials accountable in cases where corruption is proved.
A full-fledged implementation wing of the FTO office is regularly co-ordinating with the FBR Legal Wing for speedy implementation of the FTO orders. In this regard, there is an increased level of co-operation between the tax authorities and the FTO office. The FBR has invited the FTO to address the upcoming tax conference, which reflects better co-ordination between the two departments, the FTO added.