The Federal Board of Revenue (FBR) has strongly reacted to a news report titled “Biggest tax swindle appears in FBR,” which appeared in a local English newspaper on February 6, 2022.
It’s been dubbed“malicious in intent and suspicious in content,” the tax machinery declared that “the information contained in the instant news story is laughably unfounded, misleading, and far from facts.”
The regulator explained, “It has been claimed in the subject news story that a new tax scam has surfaced in FBR where tax authorities illegally paid over Rs. 16 billion in Sales Tax refunds to hundreds of big retailers in the past five months. Unfortunately, the information contained in the instant news story is laughably unfounded, misleading, and far from facts. The scribe of the story failed to understand even the basic procedure and relevant laws involved in the issuance of refunds and deduction/disallowance of an input tax adjustment. Similarly, the said reporter failed to understand the basic difference between issuance of refund and input tax adjustment.”
The FBR clarified its stance by stating that the issue is unrelated to refunds, as reported in the news item. Instead, it’s about adjusting the input tax of Tier-1 shops who didn’t interface with the POS system. According to the FBR, a change to the relevant articles of legislation was recently implemented, and all Tier-1 shops who failed to register with a POS System would no longer be eligible to claim a 60 percent input tax adjustment in their monthly Sales Tax Return.
Legally, the FBR stated that this is a standard examination that Field Formations perform on a regular basis. However, Sales Tax General Orders (STGOs) were established to automate the procedure using the IT system. It’s ludicrous to suppose, as in the false tale, that routine enforcement action was superseded by the STGOs’ issuance. Even so, it was merely a punitive deferral, with refunds permitted. “FBR has put in place a very robust system to verify the payment and deduction of input tax adjustment and there are many checks built in the system to authenticate and verify the processes,” it added.
In response to the immediate news item, the FBR confirmed that the situation was brought to the attention of Chairman FBR/Secretary Revenue Division, Dr. Muhammad Ashfaq Ahmed, who ordered an investigation into the matter to determine why the system modifications were not operating properly.
In the event of a technical failure, the cause of the failure would be investigated, and the problem would be fixed as quickly as feasible. Furthermore, in response to the revenue loss noted in the news item, the FBR has explained that Field Formations are already implementing the law, and that if any input has been accepted, it would be rejected in the next month’s sales tax return, which is a standard tax administration function. It’s worth noting that the FBR had previously taken up the problem on its own, and Chairman FBR had already launched an investigation. It’s worth noting that this was not discovered after the publishing of immediate news reports. Rather, the system detected the malfunction/anomaly on its own, prompting an immediate investigation.
FBR has also said that the news item in question is based on an inaccurate assessment of facts. Calling it a “scam” represents the irresponsible reporting that all members of society should avoid. In the end, FBR decided that any changes that were improperly approved will be invalidated.
The tax system claimed that it had ushered in a new age of clean taxes through a variety of innovative legislative and operational reforms. These out-of-the-box ideas have not only resulted in constant income increases, but they have also helped to close the trust gap between the FBR and taxpayers. “Therefore, the ongoing drive for digitization, transparency, and taxpayers’ facilitation across the country has already perturbed those vested economic interests who have largely been the beneficiary of various tax exemptions and revenue leakages for decades, and who could, in fact, be behind such ludicrous content to demoralize the tax administration. Malicious news items like this one are, indeed, published to malign FBR and serve the interest groups who are frustrated by the measures adopted by FBR to maximize tax compliance through a transparent tax system, driven by technological innovations,” it said.
It concluded that the Chairman has also asked Member (Public Relations) FBR to organise monthly tax law and procedural training sessions for FBR reporters in the future to assist them avoid ludicrous sensationalism.