June 04, 2007	Monday	Jamadi-ul-Awwal 18, 1428

The on-going reforms in the Central Board of Revenue (CBR) may have given a pleasant physical look to the tax collecting arm of the government but some operational legacies still haunt its various departments. Old habits die hard.

The CBR reforms which began in 2002 with the World Bank funding of $150 million, were expected to be completed this year. As delays were inevitable in such a large-scale overhauling of a big national institution, the deadline has been extended up to 2009. Now, a completely new infrastructure along with human resource development has been undertaken to provide a new environment to taxpayers. .

Undoubtedly, the CBR is managing a number of new facilities such as, large taxpayers unit (LTU), medium taxpayers unit in Karachi and in other major cities of the country to be ultimately merged into different regional tax offices. All these fully automated units are working to ensure minimum but no direct contact of tax collectors with taxpayers.

The working of these modern tax-collecting units is based on five major functions: audit/assessment, enforcement/recovery, legal division, IP division (information processing) and tax facilitation. In the past, all these functions were carried out by each circle and there was a concentration of power which gave rise to corruption.

The basic thrust of the reforms is to do away with the legacy of half a century of direct contact of tax collectors with taxpayers. This was done by the introduction of Universal Self-Assessment Scheme (USAS) under which the tax returns filed are taken as a final assessment order. However, around five per cent of cases filed under USAS are selected through computer for detailed audit.

A large number of taxpayers have been saved from harassment of tax hounds. But some of the staff members and officers of the direct tax offices operating on functional base have not been able to shed their past habits. In this sense the CBR has not been very successful in bringing a total change in its working environment.

Out of the five functions under which income tax departments are presently working, postings in the enforcement/ recovery are being highly sought. The primary job of this department is to issue refunds, exemption certificates and to recover tax demand.

After USAS, little charm has been left for tax officials to work in most of the departments except for enforcement or recovery sections where there are opportunities for extra benefits by way of issuing bogus, duplicate even triplicate refunds. Other functions of the enforcement section also carry some lucrative returns.

On many occasions, some officials have drawn the attention of their high authorities towards rampant issuance of bogus refunds. In many cases, refunds in a single case is issued twice or even thrice thereby depriving the national exchequer of billions of rupees. Last year, there had been up to 143 per cent increase in refund issuance when the total amount paid stood at Rs4.211 billion in one of the tax regions. Even an income tax commissioners in a letter to his superiors said:: “No doubt that due to the growth in economy tax deduction has also increased during last year. But extra ordinary increase in refund issuance does not correspond to growth in tax collection and that too specially in the wake of exemptions available to taxpayers falling under Normal Tax Regime (NTR).”

Though the CBR has fixed amounts for the approval and issuance of refunds at various administrative levels, flabbergasting facts have surfaced. According the CBR’s break-up of refunds, a taxation officer can approve up to Rs0.1 million, IAC up to Rs0.5 million and Commissioner of Income Tax above Rs0.5 million.

But a sort of competition is going on within the department in issuing bogus refunds. Some departmental documents reveal that the taxation officer who had the authority to approve lowest refund amount of up to Rs0.1 million issued the largest number of refund amounts. Officials including inspectors approach taxpayers and give them guidelines as to how false refund claims can be filed even if there is no justification for any claim whatsoever.

Many tax officials have issued refunds twice and even thrice on commercial and industrial utility bills. The government collects income tax (withholding tax) along with utility bills which can be refunded or adjusted at the time of filing tax returns. A startling disclosure came to fore when two tax officials of Sibi income tax circle started quarrelling over the distribution of collected. money. .

As per modus operandi, officials in connivance with persons of rented industrial and commercial establishments, manage to get refund twice and thrice. In the first phase they arrange refund on utility bills on the basis of rented premises and use the same bills which are normally in the name of owners for second refund and in the third instance, they ask the owner to get annual bill from utility company of his premises for which refund is issued

A tax official of Sukkur income tax circle was nabbed after the officials came to know that he was directly transferring such refund amounts into his account and the case was referred to National Accountability Bureau (NAB). The magnitude of fraud and wrong refunds could well be judged from the fact that Nawabshah income tax circle which collects less than Rs60 million has issued refunds of the same amount.