Federal Tax Ombudsman (FTO) Dr Shoaib Suddle has that the taxpayers succeeded in obtaining refunds to the tune of Rs 5.095 billion during 2010 after the FTO took suo motu notice of the cases. Sharing one-year performance of the FTO Office, Dr Shoaib Suddle told media that the amount of refunds issued to taxpayers during 2010 was nearly 32 times more as compared to past years because of these suo motu notices.
The FTO for the first time in 2010 since its establishment started conducting suo motu investigations involving matters indicating underlying systemic or major service-delivery issues. Under the suo motu jurisdiction, the FTO got settled 400 sales tax cases involving refunds of Rs 180 million, and another 805 cases of held-up bank guarantees amounting to Rs 80 million.
In addition, 194,056 duty draw-back customs cases involving refunds of Rs 4,904 million were also settled during 2010. A further amount of Rs 191 million was refunded in 70 sales tax cases. The accumulative data revealed that the taxpayers received refunds amounting to Rs 5,095 million during 2010 under the Federal Tax Ombudsman''s suo motu jurisdiction.
Explaining the issues relating to refunds, he explained that the fine performance of the FTO Office is evident from the fact that total refunds got issued to taxpayers in 196,015 cases during 2010 exceeded Rs 7 billion as compared to Rs 2 billion for the entire nine-year period of 2000-09. In other words, the amount of refunds issued to taxpayers during 2010 was almost 32 times the average amount of refunds issued annually during the past 9 years.
In 2010, the Office of the FTO has received 1446 individual complaints of which 955 (66 percent) pertained to income tax, 276 (19 percent) to sales tax, 205 (14 percent) to customs and 10 (less than 1 percent) complaints involved the Federal Excise Duty. Of these, 1261(87 percent) complaints were decided by December 31, 2010. The 83 percent of decided complaints ended up in favour of the taxpayer. This means that out of every five complaints, four are decided in favour of taxpayers on the basis of merit where relief is necessary for the taxpayers. Additionally, all 175 complaints pending from 2009 were disposed of by March 31, 2010.
Responding to the quantum of blocked refunds, he said that according to estimates around 10 percent of the total revenue is under circulation or process of refunds. He said that if reforms have not been introduced in the tax machinery, the situation could be even worst. There is a lot of improvement in the FBR as a result of reforms.
However, there is still need of improvement to check tax evasion and address the genuine grievances of the taxpayers. Around 70-72 percent of the FTO orders are implemented by the FBR. The cases involving big amount of refund etc and strict disciplinary action against the tax officials in certain cases are not implemented by the FBR. In certain cases, the FBR file representation to the President against the orders of the FTO. Around 80 percent presentations of the FBR are turndown by President.
Responding to a query, he said that tax collection potential of Pakistan could be around Rs 4-5 trillion. There are loopholes and pilferage in the taxation system and resultantly the FBR is only collecting one third of the actual tax potential.
He said that the average time taken in decision of a complaint during 2010 was 67 days as compared to 117 days during 2009. As a matter of fact, there was hardly a complaint that took more than 3 months in 2010. Exceptionally, as against refunds of Rs 94 million in 231 individual cases in 2009, the amount refunded in 685 individual complaints during 2010 on the intervention of Federal Tax Ombudsman exceeded Rs 1972 million.
While the office of Federal Tax Ombudsman is playing an increasingly critical role in addressing taxpayers'' grievances against tax maladministration, the problem is systemic and needs concerted efforts on the part of the FBR. About the nature of complaints, he said that problematic issues have been seen on the customs side. The issues mainly relate to declared/assessed values and non-application of valuation rulings.
Dr Shoaib Suddle said that the FTO office has pointed out around 35 systemic issues in the taxation system. The issues have been communicated to the Board for further necessary action. In certain issues, the FTO office has issued guidelines to the FBR for action. He said that plan is underway to set up a web-based system for the taxpayers for filing of complaints electronically. This would substantially reduce the time for processing of complaints.