Taxing aid for IDPs may upset donors

November 04, 2013

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PESHAWAR, Nov 3: The Provincial Disaster Management Authority (PDMA) has warned the federal authorities that the collection of sales tax from the Khyber Pakhtunkhwa government might lead to halting foreign-funded humanitarian assistance projects in the province.

In a recent letter to the National Disaster Management Authority (NDMA) the PDMA, Khyber Pakhtunkhwa, has asked it to help it get a refund of Rs8.1 million from the Federal Board of Revenue.

The PDMA has moved the NDMA against the sales tax authorities after they collected the tax from the provincial government against food and non-food items purchased in 2009-10 for distribution among millions of internally displaced persons under a UNHCR-funded relief project.

Terming the collection as ‘unauthorised’, the PDMA said: “The withdrawal of Rs8.16 million from the UNHCR bank accounts is unauthorised and would have negative/adverse impacts on all the donors and there is possibility of the abandonment and stoppage of this project and other projects by the UNHCR and other international donors.”

The PDMA has informed the NDMA that the sales tax collection from Khyber Pakhtunkhwa government risks to annoy foreign donors and they might stop their projects in Khyber Pakhtunkhwa.

“It is requested that the matter may kindly be taken up with the chairman FBR, Islamabad, to issue orders to the Chief Commissioner RTO, Peshawar, for refund of Rs8.16 million to the UNHCR bank account in the best public interest,” contains the PDMA letter to NDMA’s chairman.

The PDMA has long been running a dispute with the Peshawar-based sales tax authorities after they levied sales tax on its purchases made in 2009-10. The PDMA has been of the view that sales tax cannot be charged to it since the purchases made in 2009-10 were meant for distributing food and non-food items among millions of internally displaced persons.

The tax authorities had initially levied Rs6.012 million sales tax on PDMA’s Rs37.5 million purchases.

This led the PDMA to move the Commissioner Inland Revenue (Appeal), Peshawar, against the levy.However, the commissioner accepted the PDMA’s stand partially and asked it to pay the reduced amount of Rs4.85 million. The PDMA moved the Commissioner Appellate Tribunal Inland Revenue, Peshawar, and challenged the reduced levy. This appeal, too, was rejected in July last year.

However, after a gap of over one year and three months, the secretary of Khyber Pakhtunkhwa law, parliamentary affairs and human rights department on Oct 23, 2013, in a letter to the office of the advocate general, Khyber Pakhtunkhwa, advised it to challenge the appellate tribunal’s decision through a writ petition before the Peshawar High Court.

In this respect, the advocate general was also asked to make the concerned dealers/suppliers as parties to the case, making them to pay the sales tax instead of the PDMA.However, in the meantime Rs8.16 million was paid to the office of the enforcement and compliance-II (sales tax department) on Oct 25 last from a bank account that receives funds/donations from the United Nations High Commissioner for Refugees (UNHCR).

The funds are meant to extend relief to IDPs staying at a tented village at Jalozai, Nowshera district. The PDMA has informed the NDMA that the payment was made to the sales tax authorities by the bank without consulting it.

It has termed it in violation of the terms and conditions of an agreement and Memorandum of Understanding between the federal government and UNHCR viz-a-viz disaster management and relief activities for IDPs.

“Food items, water supplies and other domestic needs of the IDPs are fulfilled from the funds deposited in this account by UNHCR,” the PDMA said in the letter sent on Oct 30 last.

The PDMA believes that the funds recovered from the UNHCR-funded account ‘is not only against the international laws, agreement and MoU with UNHCR,’ but it is also against the laws of Pakistan.

“The PDMA is a government department, having no source of income/revenue but only make disaster management through loans, aids and donations received from the government/non-government organisation and foreign donors,” contains the letter, adding that withdrawal of the amount from the UNHCR account is unauthorised and carries negative impact for the provincial government in front of donors.

“In the instant case, 100 per cent amount of sales tax of Rs4.85 million and penalty and default surcharge for refund of Rs3.2 million was recovered from PDMA which is not correct,” contains the PDMA letter, adding that it was a government entity and not a registered firm/importer/exporter.