Negotiations between Federal Board of Revenue (FBR) and representatives of zero-rated export-oriented sectors remained inconclusive to make headway to settling the deadlock on two-percent sales tax imposition on Tuesday. The imposition will stay unchanged, however a mechanism the export-oriented sectors can propose to the FBR as how to deal with refunds backlogs, Member Inland Revenue Raza Baqir said at the meeting held at PHMA House.
Scores of associations from five zero-rated export sectors attended the meeting with the FBR official to reach a settlement on what they called a "sudden" and "overnight" imposition of two-percent sales tax. The meeting spanned for about two hours but ended with a disagreement note, as Baqir insisted on the justification of tax enforcement. However, value-added textile, carpet and leather exporting sectors showed resentment against the tax.
Raza Baqir was also surprised over the presence of print and electronic media as he claimed the meeting was called on his request but did not know of unexpected greater number of presence of industries representations to reply their questions and concerns.
Replying to the questions of export sectors representatives, Baqir made it clear that the zero-rate export sector meant what the Sales Tax Act of 1990 described. He assured the stakeholders that the zero-rated regime for the five exporting sector would continue untaxed.
He claimed the two-percent taxation was not sudden, saying after rounds of formal and informal negotiations between the FBR and exporting sectors, the tax was announced to collect revenue not less than refunds. He pointed out that the FBR had made Rs 16 billion tax collection but paid Rs 18 billion in refunds against the claims, plunging its revenue by Rs 2 billion. "In the last six months, the FBR collected Rs 1.1 billion and paid Rs 6 billion in refunds," he added.
However, he was unable to name those who received tax refunds against fake claims. Chairman Pakistan Hosiery Manufacturers and Exporters Association (PHMA) Muhammad Javed Bilwani called upon the FBR to spare the 80 percent tax paying documented textile sector from the sales tax imposition.
Baqir said the FBR intended to expand its tax base through the tax imposition on the retail businesses of textile in the country as its consumers were nearly 180 million people. He said the FBR had exempted sizing, processing and waiving textile sectors from the tax threads as a notification was about to issue anytime. He maintained there would be tax refund issue for the zero-rate sectors if a mutually agreed mechanism was evolved.
"We are open to all sorts of propositions by the stakeholders how to continue the tax refund flow unstopping as it could be through Customs collectorate as well if RTOs and LTOs are not trusted," he said. He agreed that the RTO and LTOs were "unnecessarily" holding back the refunds of taxpayers just to show their better collection by the fiscal year end, and said refunds of taxpayers should be provided to them immediately.
Member Inland Revenue said world-wide governments did collect taxes from export sectors and then refund them just to run their daily businesses. He said exporting sectors were globally exempted from sales tax. He told the meeting that the imposition of two-percent sales tax was the decision of government and not the FBR. He however did not agree to withdraw the tax.
Earlier giving views on the tax, Javed Bilwani showed anxiety over the government rules over the tax collection, saying "if the government pays it back to us in refunds then why it takes from us." He said the government should not subject the 80 percent documented export sector by burdening it with two-percent tax amid soaring financial crunch the industries were facing. He suggested the government should bring the non-documented 20 percent tax evaders into its web. "It is beyond one's comprehension," he said.
Former chairman KATI, Masood Naqi criticised the FBR for its "secret" and "sudden" policies, which he said, hit the entire industry overnight. He said the two-percent sales tax imposition was a plan to keep the country's big production sectors engaged in financial troubles. Chairman Pakistan Leather Garments Manufacturers and Exporters Association Fawad Ijaz said the FBR's procedures for tax refunds were inept to ensure financial flow to the taxpayers.
He was of the view that taxpayers continued to struggle for refunds even sometimes the claims took six months to come about. He feared the FBR was going to embrace the older mechanism instead of going upward to improve the taxation system. He said taxpayers refunds were held back by the collectors ahead of announcement of fiscal budget and that year like the previous two years the trend was expected to continue, despite the federal tax ombudsman warning to the authorities.
He said the two-percent tax would pave path for the fake refund claims and the negative trend in taxation was feared to mount further. Fawad demanded of the FBR to drop the tax on zero-rate for exporting sectors. Rafiq Godel, Naqi Bari, Zubair Motiwala, Zain Bashir, Khwaja Usman, Saleem Parekh, Mehtab Chawla and others spoke during the meeting.