LAHORE: The Federal Board of Revenue (FBR) may further ‘delay’ a resolution on double taxation and other input adjustments taken up by the Punjab government a few weeks ago because of change of top guards in the central taxation body and red-tape.

The FBR had convened an important meeting of all provincial revenue authorities in Islamabad to settle mutual ‘disputes’ about two weeks back, but it was postponed for a lack of quorum.

Officials say the PRA authorities in a meeting with the Punjab chief secretary office had taken up eight points following which the latter had sent a detailed written correspondence to former FBR chairman Tariq Bajwa.

They say since the federal government has made a few changes at the top level in the FBR, the matter is feared to be lingered on for unlimited period of time which could deprive the PRA of its due share of revenue against annual revenue target of Rs72 billion for 2015-16.

About withdrawal of the Federal Excise Duty on services (taxed under provincial domain), the PRA states that after the 18th Constitutional Amendment, the FBR should have withdrawn the FED on all services specified in Table-II of the first schedule to the Federal Excise Act, 2005, but not much has been done.

The PRA says a little progress is being made regarding input adjustment with the FBR in accordance with an MoU dated 13-03-2014 through which both agencies were periodically required to work out and settle their revenue accounts arising due to cross input tax adjustments.

Another matter is taxation of toll manufacturing to which the PRA claims that the FBR is continuing to tax this service under the (Federal) Sales Tax Act 1990.

As per EU’s VAT legislation when a customer provides a supplier with the materials necessary for the production (manufacturing, construction, etc.) of a specific good, the supplier provides a service. This is “toll manufacturing” which is taxable by PRA.

Tax on air services (withdrawal of FED by FBR) -- through Punjab Finance Act 2015, the Punjab government has levied Punjab Sales Tax on air travel, carriage of goods by air and chartered flights which are currently being charged to FED. The FBR is challenging this levy and not removing FED on the same.

Fiscal interventions in common tax bases -- in the budgets of 2013-14, 2014-15 and 2015-16, the FBR has increased withholding tax rates or imposed new withholding taxes on service sectors causing losses to Punjab ST.

Extra/further tax on PRA registrations -- FBR has levied extra tax @ 5 per cent on certain categories of industrial and commercial connections of electricity and gas.

Besides, further tax @ 1pc has also been levied on persons not registered with the FBR. The PRA’s registered persons, who are legally not required to obtain registrations from FBR, are being treated as unregistered for the purposes of extra tax and further tax, creating hardship for them.

Under mutual sharing of tax data, the PRA is providing complete access to FBR in respect of its tax database, but the FBR is not reciprocating for either its income tax or sales tax data.

Operational integration of federal and provincial sales taxes is essential to keep the national GST system closer to VAT model.

According to eighth point, the PRA says some FBR officers in their personal capacity have interfered with PRA’s recent operations.

A complaint has accordingly been submitted to one latest incident. It is requested that officers of FBR may be sensitised about the conduct expected from them and in future such incidents may please be avoided.

Published in Dawn, November 27th, 2015