LAHORE: The Federal Board of Revenue (FBR) has generated refund payment orders (RPOs) against the exporters’ tax refund claims of Rs23 billion but does not have money to pay back the claimants.

“The cheques against the refund claims can be issued to the exporters only after permission from the federal finance ministry,” a senior FBR official told Dawn on Tuesday.

He agreed that the finance ministry was delaying the release of the exporters’ refunds because of its financial problems.

“Under the government’s loan agreement with the International Monetary Fund (IMF), we are required to not let the fiscal deficit cross the five per cent threshold during the current year. The huge dip of Rs113 billion in tax collection during first seven months of the current fiscal means that the government doesn’t have space to return the money back to the exporters,” the official who asked not to be named said. “Hence, the ministry is withholding permission to release the refunds.”

According to the exporters, a sum of Rs42 billion of their money was being withheld by the FBR in refunds under one pretext or the other. It is despite public commitments made by both finance minister Ishaq Dar and the FBR chairman to streamline the refund system to ensure the release through banking channels in one month after a claim was made.

The FBR officials say the delays in the release of the refunds was not caused by them and blame the finance ministry for it. “We will pay the money to the exporters the very day the ministry tells to do so,” the official said.

The exporters, on the other hand, say the FBR was not releasing their money to hide its inefficiencies and inability to collect the targeted amount of taxes. “Since the release of the refunds will reduce the size of their collection at the end of the year, the senior FBR officials have chosen to punish the industry for their incompetence,” a textile exporter from Faisalabad said. He said the delays in the release of their refunds had caused severe liquidity crunch for the small to medium sized exporters who had 25-40 per cent of their liquidity stuck in refunds with the FBR.

Declining to give his name, the exporter said the FBR was using “negative” tactics to stop the release of refunds to them. “The case of tax fraud by a trader from my city, for example, is being used to malign the spinners who had sold their yarn to the trader, deducted the two per cent sales tax and deposited it with the government. Why else would the FBR officials give the names of 51 spinning mills that had sold small quantities each to him because he was registered under the sales tax law and shown as an active taxpayer on the Board’s website from 2004 to October last year? Also all the deals were transacted through the banks,” he said.

He said it was the duty of the FBR to catch the unregistered weavers whom the trader booked for fraud had sold the yarn to and hadn’t paid the additional tax of one per cent on sales to buyers operating outside the tax net.

He angrily said such tactics were being used to vitiate the relationship between the business community and the government. “How long do you think we can tolerate this insulting attitude of the authorities?,” he asked. He suspected that the FBR officials in Faisalabad had intentionally given the names of respected, tax compliant mills as part of a drive to malign them and created a pretext to delay their refund claims.

In the meantime, Aptma Chairman S.M. Tanveer has criticised the Sales Tax Department of the FBR for what he alleged to be a malicious campaign against the textile industry, saying such tactics would damage the business and investment environment in the country.

He said specific names of highly respected business groups had been fed to reporters by some FBR officials to malign them. He said Mr Dar should take notice of the campaign against the industry and punish those who had fed wrong information to the reporters.

He said the fraud committed by a trader could not be used to give a bad name to the entire industry, especially when the spinning mills had thrice satisfied the Sales Tax Department on strict observance of the requirements of SRO 1125 and SRO 283 (I) 2011.

According to him, the Sales Tax Department has always found it easy to malign the organised corporate sector while deliberately ignoring the fact that the spinning mills have always ensured that the buyers’ name is present on the active taxpayer list, all payments are made through banking channel and applicable tax has been paid duly.

He apprehended that the Sales Tax Department was hiding its inefficiencies and inabilities to check the unregistered buyers by printing the names of sound corporate entities for a fraud of Rs7.6 million against the transaction of Rs762 million.

He said the industry circles are of the firm view that the Sales Tax Department has initiated the malicious campaign against the corporate sector only after the industry demanded early release of stuck up refunds of Rs42 billion.

Published in Dawn, February 4th, 2015

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