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Tag: Federal Tax Ombudsman

  • FTO declares Car Amnesty Scheme illegal

    FTO declares Car Amnesty Scheme illegal

    ISLAMABAD: Federal Tax Ombudsman (FTO) has declared an amnesty scheme for customs clearance of stolen imported cars without legal action.

    Customs authorities’ decision about clearance of stolen imported cars under Transfer of Residence, Baggage Scheme or Gift Scheme upon payment of redemption fine and taxes without following any legal provision has been decleared illegal by the Federal Tax Ombudsman.

    In an own motion investigation, the FTO Islamabad found that the decision taken in Customs conference held at the then CBR (FBR) on 02.08.2006 was illegal.

    The FTO’s investigation committee also underlined that without following due legal procedures such decisions will promote illegal import of stolen vehicles and facilitate international criminal activities.

    In this connection, FTO issued notices to Federal Board of Revenue (FBR). The FBR submitted report that Customs collectorates in Sialkot and Peshawar had cleared six and three such stolen imported vehicles in 2007 and 2013-2014 respectively.

    The FTO also recommended FBR to direct all Collectorates of Customs and other concerned authorities to stop these illegal practices forthwith.

    The Customs authorities were also directed that the stolen imported vehicles either should have been returned to authorities of the country from where vehicles were stolen after receiving occurring expenses or these vehicles should have been confiscated and disposed of through public auction.

    The committee also recommended FBR to direct MCC Sialkot to seize identified six vehicles and take appropriate legal action against importers involved in such illegal businesses.

    The FTO ordered a report from the competent authorities to be submitted within 45 days. Earlier, the FTO took the Own Motion in connection of the decision taken in Customs Conference held at the then CBR (FBR) on 02.08.2006, in which it was decided that the Collectorates may clear stolen imported vehicles after imposition of 30 percent redemption fine under the Provision of Customs Act 1969 while no action should be taken unless recognized agency of the foreign country approaches government of Pakistan.

    FBR’s appeal in bogus sales tax refunds rejected
  • FBR’s appeal in bogus sales tax refunds rejected

    FBR’s appeal in bogus sales tax refunds rejected

    An appeal of the Federal Board of Revenue (FBR) has been rejected by the President of Pakistan in issuance of bogus refund cases.

    President Dr Arif Alvi on Sunday disposed of 42 representations of the FBR in cases of bogus sales tax invoices, worth over Rs 1.2 billion. 

    The FBR had filed the representations with the President of Pakistan assailing the orders of the Federal Tax Ombudsman (FTO) passed in suo moto cases, in which bogus sales tax refunds were reimbursed fully or partially by the delinquent officials of the FBR to the fake claimants.

    The huge scam was unearthed by FBR’s Directorate General Intelligence & Investigation-Inland Revenue and the Red Alerts were issued to the concerned field formations. However, no action was initiated against the FBR officials and the fake claimants.

    The FTO on taking suo moto notice of the matter had issued directions to the FBR to investigate and identify the officials involved in verification of the registered persons (RPs) and initiate a disciplinary action.

    In pursuance of the FTO’s recommendations and also the previous orders of the President of Pakistan passed in similar cases, the FBR constituted six fact-finding inquiry committees to deal with 130 suo moto cases relating fake refund claims.

    The Terms of Reference (ToR) of the committees were meant to identify the wrong-doings and involvement of officials in each case, and fix responsibility. Also, these committees were tasked to prepare a draft charge sheet and statement of allegations with respect to each official and submit a report to the Board within 30 days.

    President Alvi, in view of the findings of the committees, disposed of the representations of the FBR pertaining to the cases in which full or partial refunds were paid fraudulently.

    He directed the FBR for submission of a monthly implementation report to the Federal Tax Ombudsman’s Secretariat till the completion of the action on each case.

    He also ordered to afford an opportunity of show-cause and hearing to the official in case of any departmental action proposed against him, to satisfy the requirement of due process and the principles of natural justice.

    Criminal proceedings against officials of RTO-II Karachi in fake sales tax refunds ordered
  • FTO proposes initiating criminal prosecution against smugglers

    FTO proposes initiating criminal prosecution against smugglers

    ISLAMABAD: Federal Tax Ombudsman (FTO) has recommended that tax authorities should initiate criminal prosecutions against persons involved in smuggling or selling non-duty paid goods.

    In its proposals for budget 2021/2022, the FTO recommended measures on the issues of smuggling, misdeclarations, under-invoicing and non-transparent auctions.

    In order to effectively check the smuggling, it was recommended that criminal prosecution should be initiated against the persons/owners of the showrooms involved in business of Non-Duty Paid (NDP) vehicles, fuel pumps of smuggled oil and storage godowns of other smuggled items, from whom the NDP goods were recovered as provided in the Customs Act, 1969 read with the Prevention of Smuggling Act, 1977.

    Installation of scanners on the ports was recommended to be given top priority. It was emphasized that if government invested herself in this project, it will raise the potential of higher revenue and more effective check on misdeclaration of description or quantity of imported goods.

    So far two scanners have been added at Karachi Ports in addition to one already installed there. Two scanners have also been installed at Jamrud and Torkham, Peshawar.

    It was recommended to provide a mechanism in law for cross-matching of value declared on export documents of exporting station to import documents at importing station.

    Federal Board of Revenue (FBR) was asked to prescribe Model Auction Rules for auction through electronic means and prepare/operationalize an auction module in the WeBOC system to bring transparency and efficiency in the auctions.

    According to FBR, under the WeBOC-Glo initiative (an enhanced version of WeBOC), an electronic auction module has been developed and deployed in the system. This module envisages online registration of bidders who can bid for all auctionable goods displayed on website by the Customs authorities. Pilot is being run at Karachi Port (South Asia Port Terminal only).

    In view of constant complaints about delayed clearance at the border stations, generators should be provided on priority for speedy passengers/goods clearances and maintenance of IT and infrastructure support.

  • FTO recommends disabling sales tax registration as soon application for de-registration received

    FTO recommends disabling sales tax registration as soon application for de-registration received

    ISLAMABAD: Federal Tax Ombudsman (FTO) has recommended disabling sales tax registration as soon application received for de-registration.

    The FTO submitted proposals for budget 2021/2022, stating that in order to stop misuse of registration for issuing fake invoices, immediate disabling of the registration was proposed in electronic system as soon as the application for de-registration was received.

    Sales Tax Registration of commercial importers was proposed to be allowed only to Income Tax filers along with other necessary cautions (i.e. declaration of Pakistan Customs Tariff (PCT) headings of the products they trade in) to check bogus registration.

     Following budget proposals were also sent to FBR:

    • to provide for immediate disabling of the registration in electronic system, pending final de-registration, as soon as the application for de-registration was received;

    • to prescribe a list of documents/records to accompany the de-registration applications for the purpose of sub-rule (2) of rule 11; and

    • suitable amendment to be made in rule 12(a)(vii) so that the Commissioner shall issue the orders of revocation of suspension within two weeks from the last date prescribed for issuance of show cause notice.

  • FTO proposes simplification of income tax return forms

    FTO proposes simplification of income tax return forms

    ISLAMABAD: Federal Tax Ombudsman (FTO) has advised the Federal Board of Revenue (FBR) to simplify income tax return forms in consultation with stakeholders to facilitate the taxpayers.

    In its proposals for the budget 2021/2022, the FTO recommended simplification of returns forms in consultations with small taxpayers along with availability of option of filing the returns in Urdu.

    Similarly, an option to file the returns manually with facility provided by the FBR to upload on line data was also proposed.

    The FBR in response to the FTO stated that simplified Income Tax Returns for salaried, small traders having turnover up to Rs10 million, manufacturing Small & Medium Enterprises (SME’s) having turnover up to Rs50 million have been issued.

    It was recommended that FBR should devise some system so that sunset date of filing return is not extended but late filing may be allowed with certain incremental penalty for delay in filing per month or any part of it.

    The FBR responded that in 2020, last date of December 08 was not extended. According to FBR, Income Tax Return making rules have been issued. Though these are applicable for Tax Year 2022 but FBR is following this for Tax Year 2021 and return forms would be available by 1st July (to be submitted within due date without extension on last date).

    The FTO proposed that FBR may approach the concerned Authorities/Establishment Division, to issue instructions to bind the heads of government departments, autonomous bodies and large scale public sector organizations to get the certificate of filing of returns by their employees falling in the tax net at the end of the last date and to link their promotion/annual increments with mandatory return filing.

    Regarding audit, it was proposed to rationalize its parameters so that more focus should be laid on large entities rather than small taxpayers.

    Moreover audits should also include investigative work to detect the evasion through a study of input/output standards of utility bills and production capacity of machinery etc. Several cases for audit should in line with capacity of FBR to complete the audit in a year.

  • FTO recommends restricting tax officials’ powers

    FTO recommends restricting tax officials’ powers

    ISLAMABAD: Federal Tax Ombudsman (FTO) has recommended restricting powers of tax officials in recovery of outstanding account through freezing bank account of taxpayers.

    The FTO in its proposals for budget 2021/2022 said that coercive recoveries through attachment of bank accounts without notice and subsequent delay in restoring the account, hits the taxpayers very hard.

    It was recommended that notices should be issued with bar code and time limit may be prescribed for ensuring the de-sealing of bank accounts of taxpayers/assesses after resolution of issue.

    Following measures were also suggested as budget proposals:

    • Restrict the use of power to attach bank accounts unless the case under litigation has been established at least in the first appellate stage;

    • Adherence to service of Bar-Coded notices to eliminate possibility of abrupt attachment of bank accounts for recoveries and hasty ex-parte decisions;

    • Shortest time limit may be prescribed in the statute to ensure de-sealing of bank accounts of taxpayers/assesses.

    According to FBR, it is mandatory not to issue Income

    Tax related notice without Bar Code. The mechanism of automatic stay of demand by paying 10 percent of demand also exists under all IR laws.

    However, FTO constantly receives complaints on coercive recoveries and issues appropriate Recommendations.

  • FBR’s representation in bogus refunds rejected

    FBR’s representation in bogus refunds rejected

    ISLAMABAD: A representation of Federal Board of Revenue (FBR) has been rejected by the President of Pakistan on Friday that was filed against an order passed by the Federal Tax Ombudsman (FTO) in bogus refund case.

    According to details, President Dr. Arif Alvi rejected the FBR’s representations directing the tax authorities to recover amount of Rs14 million paid in bogus refund claim.

    The President upheld the decision of Federal Tax Ombudsman (FTO) following its suo-moto action against the irregularities committed by the FBR field formations in registering, processing, sanctioning and issuing sales tax refunds to fake refund payments during the period 2012-2013.

    President Alvi in his decision wrote: “it was surprising and shocking that FBR failed to investigate fake claims where refund had already been made in full connivance with FBR officials”.

    Expressing strong displeasure over the scam, he said: “How can we afford not to recover and criminally charge the fraudsters.”

    The President stressed recovery of the embezzled money, saying: “instead of resistance by FBR to the suo-moto action by FTO, they should recover the precious money of the people of Pakistan.”

    It is worth-stating that FBR has filed 74 similar representations with the office of the President against the orders of FTO. Out of 74 representations, 22 cases have been decided while 52 are still awaiting adjudication.

    Furthermore, according to the relevant record, FBR had allowed Rs 875.277 million to be paid to fake RPs, of which a payment of Rs 223.312 Million has already been made.

    The FTO in its verdict, dated April 27, 2020, had directed the Chief Commissioner-Inland Revenue and Corporate Regional Tax Office (RTO), Karachi to investigate and identify the officials involved in registration of fake RPs and initiate disciplinary/criminal action against those found involved and report compliance within 45 days.

    The FTO in its decision further directed FBR to initiate appropriate action including criminal proceedings leading to recovery of amount swindled from public exchequer through claiming inadmissible input tax and bogus refund.

    Instead of implementing the directives of FTO, the FBR challenged its jurisdiction and filed a representation with the President taking plea that it could not issue such orders and rely on interdepartmental correspondence of FBR.

    The President rejected FBR’s representation and made it clear that the body could exercise its power conferred under Section 9(1) of the Federal Tax Ombudsman Ordinance, 2000 to investigate irregularities in the department.

    It is to be mentioned here that the investigations conducted by Directorate General of I&I-IR (Intelligence & Investigation and Inland Revenue), Karachi in case of M/s Z.A. Exports — a fake RP with principal activity as manufacturer of iron and steel — revealed that bogus claims worth Rs 18.519 million were made in tax period 2012-13 against irrelevant invoices.

    The President lauded the Directorate General of I&I-IR (Intelligence & Investigation and Inland Revenue) for issuing Red Alerts and detecting fraudulent activities in FBR, and regretted that the “national exchequer was made to suffer colossal loss of revenue”.

  • FTO directs to enforce certificate of origin to prevent under invoicing

    FTO directs to enforce certificate of origin to prevent under invoicing

    ISLAMABAD: Federal Tax Ombudsman (FTO) has directed tax authorities to enforce certificate of origin from respective country of manufacture.

    The FTO recommended that the commerce ministry to frame and enforce rules of origin in respect of goods suspected of circumvention and import from free ports, which are not covered under preferential trade agreement (PTA).

    The FTO made these recommendations in an order dated October 01, 2020 issued in the case of M/s Poplon Pakistan (Pvt) limited, which filed complaint against the Collector, Model Customs Collectorate (MCC) Appraisement & Facilitation – East and MCC Appraisement & Facilitation – West, Karachi for failing to detect import of inorganic chrome pigments against fake certificate of origin through circumvention of origin of goods and under invoicing by various importers in respect of goods imported and cleared through Karachi Port.

    The complainant is a manufacturer of inorganic chrome pigments for use in paint, plastic and leather industries in Pakistan. The complainant alleged that after suspension of trade with India, pigment of Indian origin goods were imported through trade proxies such as M/s. Galaxy International FZC, UAE by using fake documents.

    After hearing both the parties, the FTO issued the following recommendation, that the FBR:

    To seek information from the Director General, UAE Customs under mutual legal assistance agreements for verification of origin of goods;

    To direct the Directorate General of Post Clearance Audit (PCA) to carry out post-import transaction verification of all relevant GDs so as to satisfy the accuracy and authenticity of declared import values on the basis of export documents/information obtained through commercial counselors posted in South Korea and UAE;

    To direct the Director of Customs Valuation to check accuracy of values declared by the importers and determine custom value for assessment of inorganic chrome pigments in terms of Section 25A of the Act, and

    To direct the Chief Collector (Appraisement-South), to ensure finalization of investigation expeditiously and take appropriate action in cases where mis-declaration is established; and

    To recommend to the ministry of commerce to frame and enforce rules of origin in respect of goods suspected of circumvention and import from free ports which are not covered under PTA. Also make it mandatory to furnish certificate of origin from respective country of manufacture duly verified by the respective government.

  • FBR recommended imposing penalty for late return filing instead extending last date

    FBR recommended imposing penalty for late return filing instead extending last date

    ISLAMABAD: Federal Tax Ombudsman (FTO) has advised the Federal Board of Revenue (FBR) to impose penalty for late filing of income tax returns instead extending the last date.

    The FTO in its annual report recommended that the FBR that instead of extending the last date for filing of Returns, late filing be allowed with certain penalty per month or any part of it, as it would be a more revenue-pro measure.

    The FTO further recommended that in order to encourage increase in filing of Returns by employees of government and autonomous bodies, it was recommended that FBR to approach the concerned Authorities/Establishment Division to issue instructions to heads of government Departments, autonomous bodies and large scale public sector organizations for obtaining certificate of filing of Returns by their employees falling in the tax net, at the end of last date of filing of Returns, and link their promotions/increments to filing of Returns.

    It was also suggested to devise mechanism in consultation with Securities and Exchange Commission of Pakistan (SECP) to ensure that business entities registered with SECP, who were non-filers, must file Income Tax Returns regularly.

    It was also recommended that proper assistance to the Return filers be provided through establishment of facilitation centres at convenient places.

  • Probe launched into amnesty scheme cases

    Probe launched into amnesty scheme cases

    ISLAMABAD: The Federal Tax Ombudsman (FTO) has launched investigation of over 12,000 pending cases of aggrieved taxpayers who could not avail amnesty scheme or Assets Declaration Scheme 2019 despite payment of due taxes before the deadline.

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