No deal with govt on tax refunds for pay rolls, say industry leaders

Updated April 09, 2020

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In March, the government released Rs19.662bn sales tax refunds, Rs1.508bn in income tax and Rs586 million as customs rebate. — AFP/File
In March, the government released Rs19.662bn sales tax refunds, Rs1.508bn in income tax and Rs586 million as customs rebate. — AFP/File

ISLAMABAD: Payments of tax refunds have gathered pace since the lockdowns began, picking up steam after the prime minister’s announcement of a relief package to help industry survive without resorting to large scale layoffs.

Tax officials say they are on track to complete the disbursement of Rs100 billion by the end of April under the PM package that promised these refunds against a commitment that recipients of this money will use it to run their payrolls and not lay any of their workers off during the shutdowns.

But there is no clarity on how the government intends to ensure that industry recipients will live up to their end of the bargain. In fact, in some cases, there is no clarity on whether such a commitment has even been given by industry leaders.

The Federal Board of Revenue has not issued any instructions at the time of releasing the refunds and same is the case of cash refunds of commerce ministry under the payment of Drawback of Local Taxes and Levies (DLTL) to exporters.

Despite repeated calls, neither Commerce Adviser Abdul Razak Dawood nor Secretary Commerce Ahmad Nawaz Sukhera could be reached. Meanwhile, Planning Minister Asad Umar told Dawn that a decision in the cabinet and Economic Coordination Committee was taken to link payment of refunds with wages and salaries of employees, but when asked how the government intends to enforce the condition or at least monitor compliance, he also referred the questions to the Commerce Division. “Razak is the relevant person who can explain the compliance of the government’s decision,” he said.

In March, the government released Rs19.662bn sales tax refunds, Rs1.508bn in income tax and Rs586 million as customs rebate, which the Federal Board of Revenue claimed were disbursed to industries to help them pay the salaries of employees and wages of daily wagers in April.

Meanwhile, Council of All Pakistan Textile Associations Chairman Zubair Motiwala told Dawn that industrialists have made no agreement with the government over the utilisation of refunds. “This is our money,” he said. “Industry will use it as per their own priorities.”

“We will utilise refunds in four areas — bank dues, utilities bill, raw material suppliers and wages,” he said, adding no industries can make any such agreement with the government. On the issue of export subsidy (DLTL), he said the amount is used to suppress the price for end consumers in the destination ­markets.

The first week of April saw tax refunds of Rs16.25bn. “We have almost finalised to release another Rs8bn for this week,” a senior official in the FBR told Dawn. Through all this, there is no indication on whether the government is monitoring or the industry is complying with the stated intent of the accelerated reimbursement package.

The balance amount of Rs47.75bn will be issued in the last two weeks of April after due verification, the official said, adding FBR believes in liquidation of genuine tax refunds of all industries especially the export-oriented sector.

With the outbreak of Covid-19, the industrial sector has faced severe liquidity crunch to meet their expenses to pay salaries of employees. The FBR believed that the releasing of refunds will help overcome their liquidity issues to pay timely salaries.

Between July-February FY20, the FBR has already released Rs145.12bn to taxpayers. These include Rs68.870bn as sales tax refunds, Rs66.202bn income tax refunds and Rs10.048bn as customs rebate.

Published in Dawn, April 9th, 2020