KARACHI, Jan 31: By design or by default, the inclusion of two operative clauses in the Federal Tax Ombudsman Ordinance 2000 is found to have rendered the office of Federal Tax Ombudsman (FTO) virtually ineffective for the last four years and there is a growing demand from the trade and industry for a suitable amendment.

Reports suggest Federal Tax Ombudsman retired Justice Saleem Akhtar has also indicated in clear terms of recommending to the government to review these two clauses. The implication of interpretation of these two clauses has been found to defeat the very purpose for which the government set up the institution of Federal Tax Ombudsman in 2000 on demand from taxpayers mainly from business.

Angry voices have been raised against these two arbitrary clauses of the FTO by the taxpayers, tax practitioners and the Federation of Pakistan Chambers of Commerce and Industry. FPCCI Vice-President Engineer M.A. Jabbar has moved representation for amendments in these two clauses with the government at the highest level.

The first such clause is section 9(2)B which restricts the FTO to investigate or enquire into matters related to the assessment of income or wealth, determination of liability of tax or duty, classification or valuation of goods, interpretation of law, rules and regulations relating to such assessment, determination, classification or valuation in respect of which legal remedies of appeal, review or revision are available under the relevant legislation.

Businessmen consider the section 32 of the FTO 2000 obnoxious which virtually clips the wings of the Tax Ombudsman. Under this section, the Central Board of Revenue or any person aggrieved by the recommendation or observation of the FTO is allowed to make a representation directly to that President within 30 days. While there is a provision to allow the CBR or any aggrieved person to file a representation against the FTO with the highest authority in the country, the law is silent as to how and during what period this case should be disposed of.

An official notification issued by the law, justice and human rights ministry in November 2001 instructs all government agencies and offices the "desire of the President that whenever any representation is made under section 32 of the Ordinance of 2000, the status quo is to be maintained by all concerned". Later this provision has been amended that holds FTO's findings in abeyance till the disposal of the appeal.

The crafty bureaucrats in the law division, in the first instance, have hit at the very foundation of the FTO office by restricting his jurisdiction into areas from where complaints of the taxpayers arise.

Tax collectors harass the taxpayers in assessment of incomes or wealth, determination of liability of tax or duty and classification of goods.

A special task force set up in 2000 for reforms in tax administration with Syed Shahid Hussain as its leader found that there were 650 income tax officers in the income tax department. Assuming that one ITO takes five days to complete an income assessment and determine tax liability he would be able to process at the most 60 cases in 300 working days of any single year. All the 650 ITOs, assuming that none of them would go on leave, will be able to process 39,000 cases. "How many tax returns are filed in a year?". The figure now given is about 1.3 million. One can imagine the indecent haste with which these tax returns are handled. These assessments and tax liabilities are bound to be questioned by the taxpayers. The taxpayer can go for an appeal after paying a big part of the tax liability and the case lingers on for years.

In matter of assessment of import duty there are a minimum of 62 and a maximum of 113 steps involving 26 to 34 officers. Of them six to 13 officers have the authority of putting their signatures at different stages. All these stages have a "cost" for the importers.

For all these taxpayers at income tax or at customs the taxpayers aggrieved with income assessment or classification of goods and tax liabilities cannot go to the Federal Tax Ombudsman. An important fact to remember is that all the "cost" in income assessment, classification of goods and determination of inflated tax liability is borne by the consumers.

A survey commissioned by the task force on tax administration found that for every Rs100 payable tax, the government exchequer gets only Rs38. Bulk of this payable tax amount is retained by the taxpayer, the tax collector gets 25 per cent and about 15 to 20 per cent is shared by tax practitioner.

FPCCI Vice-President Engineer M.A. Jabbar wants a very simple amendment in section 9(2)B of the FTO 2000. His proposal, moved with the support of the Managing Committee of the FPCCI suggests addition of words "except in cases of maladministration".

For section 32 of the FTO the FPCCI proposal is to put a time limit of 90 days for holding in abeyance the FTO recommendation against which the representation has been made unless such reference has been decided or the stay has been withdrawn by the President.

There is an unending conflict between the taxpayers and the tax collectors. The taxpayers say that the tax collectors patronise income suppression and concealment of tax. The institution of Tax Ombudsman itself was an acknowledgement that all is not well in tax administration.