Karachi, October 31, 2024 – Pakistan State Oil (PSO) has revealed substantial tax contingencies totaling billions of rupees as of September 30, 2024, according to its latest financial report.
The national oil company is currently embroiled in tax disputes stemming from orders issued by the Federal Board of Revenue (FBR) regarding multiple fiscal years, resulting in significant tax demands that PSO is actively contesting.
In a primary case, PSO disclosed that the Additional Commissioner Inland Revenue (ADCIR) of the FBR issued an order on June 28, 2024, concerning the tax year 2021. This order included certain tax additions and disallowances, resulting in an initial tax demand of Rs 3.01 billion. PSO responded by filing an appeal with the Commissioner Inland Revenue (CIR) Appeals on July 26, 2024. Subsequently, the FBR amended the demand to Rs 3.52 billion, incorporating an additional Workers Welfare Fund (WWF) requirement. PSO appealed this adjustment, which was partially ruled against them. Following the appeal decision, the demand was slightly reduced to Rs 3.48 billion.
Despite the reduction, PSO remains unsatisfied with certain components of the tax authority’s rulings. As a result, the company has escalated the matter to the Appellate Tribunal Inland Revenue (ATIR). However, a recent decision by the ATIR did not favor PSO. The company has therefore initiated steps to apply for the Alternate Dispute Resolution Committee (ADRC) to resolve the matter. PSO’s management, based on counsel from tax advisors, remains confident that the case will ultimately resolve in their favor. Consequently, no financial provision for this tax demand has been recorded in the company’s financial statement for the quarter ending September 30, 2024.
The report further highlights additional tax disputes involving more recent fiscal years. For the tax year 2023, PSO received a demand notice on March 28, 2024, amounting to Rs 1.47 billion, stemming from various adjustments made by the ADCIR. Following an unfavorable ruling from the CIR Appeals, PSO has submitted an application with the ADRC. The company maintains a positive outlook on the outcome, again opting not to provision the amount within its quarterly statements.
Moreover, PSO faces a smaller yet notable demand related to the tax year 2020. On April 1, 2024, the FBR issued an order for Rs 59.43 million, which PSO contested. Following an adverse decision by CIR Appeals, PSO has since moved to seek resolution through the ADRC.
These ongoing tax disputes underscore the complex regulatory landscape that major corporations like PSO navigate. The company’s strategic approach, seeking alternate dispute resolutions while maintaining optimism in legal advisories, demonstrates its proactive stance amidst financial uncertainties. With billions at stake, PSO’s tax matters remain under close scrutiny, impacting not only its fiscal reporting but potentially influencing wider industry practices in Pakistan.