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Tag: FTO

  • 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.

    (more…)
  • Criminal proceedings against officials of RTO-II Karachi in fake sales tax refunds ordered

    Criminal proceedings against officials of RTO-II Karachi in fake sales tax refunds ordered

    KARACHI: Federal Tax Ombudsman (FTO) has directed tax authorities to initiate criminal proceedings against officials involved in processing bogus sales tax refunds.

    In an own motion in bogus refunds, the FTO observed that failure of the Regional Tax Office (RTO)-II Karachi to initiate action against the persons/officials involved in registration of fake refund payment and retrieval of refund already issued prior to issuance of red alert, was tantamount to maladministration.

    The FTO ordered the FBR to:

    — direct the Chief Commissioner Inland Revenue, RTO-II Karachi to investigate and identify the officials involved in registration of fake RP and initiate legal action against those found involved;

    — identify the officers/officials who were involved in processing bogus sales tax refund on the basis of fake and flying invoices and issuing refund pertaining to tax period August 12 and take appropriate criminal/disciplinary action against them.

    — initiate appropriate action including criminal proceedings leading to prosecution of RPO and recovery of amount of Rs3 million, swindled from public exchequer.

    The FTO directed the tax authorities to ensure compliance of the order within 45 days from the issuance of the order i.e. February 24, 2020.

    The tax ombudsman in its own motion initiated investigation in irregularities committed by the FBR field formations in processing and sanctioning of bogus sales tax refunds during the period 2011-2014 identified by Directorate General Intelligence and Investigation of FBR and ‘Red Alerts’ were issued to the field formations concerned but neither any action was initiated against the fake claimants nor their connivers in the department, who were involved in bogus registration, processing and sanctioning of fraudulent refund and issuance of refund cheques, nor against the related officers/officials of bank branches concerned and PRAL management.

    The FBR issued the instance order in the case of M/s Victory International, engaged in the manufacturing of plastic products.
    The investigation of I&I FBR revealed that the RP got registered on November 11, 2010 as a manufacturer of plastic product but claimed refund of Rs3 million for tax period August 2012 on the basis of fake invoices issued by irrelevant suppliers from paper, steel, electric sectors therefore the whole activity chain was treated as engineered with aim to obtain illegal refund.

  • FTO takes Suo moto notice in pending 11,000 tax amnesty cases

    FTO takes Suo moto notice in pending 11,000 tax amnesty cases

    KARACHI: Federal Tax Ombudsman (FTO) has taken suo moto notice in 11,000 cases related to tax amnesty scheme for tax year 2018, a tax bar said on Thursday.

    The Karachi Tax Bar Association (KTBA) in a notification circulated to its members stated that the office of the FTO had taken a Suo Moto Notice on the inordinate pendency in submission of 11,000 cases of Amnesties for the Tax Year 2018.

    The Motion Number is reported as No. 11/2020.

    The Suo Moto Notice has been taken on the representation made by the Pakistan Tax Bar Association (PTBA).

    A one paged complaint form has been shared to the members in this regard.

  • FBR advised adopting zero tolerance policy against delaying taxpayers’ applications

    FBR advised adopting zero tolerance policy against delaying taxpayers’ applications

    ISLAMABAD: Federal Tax Ombudsman (FTO) has suggested the Federal Board of Revenue (FBR) to adopt zero tolerance policy against delaying processing of taxpayers’ applications.

    The FTO in its news letter for October – December 2019, said that the FBR should introduce zero tolerance policy for delay in processing of applications and talking plea of verification to defend delay in cases which exceed prescribed time limit for finalization.

    The FTO advised following set of proposals for consideration by the FBR to evolve a comprehensive plan to:

    — Develop software for system generated notices about shortcomings in documents, to be intimated to applicants immediately on receipt of refund application. It should also be ensured that notices are properly served on complaints.

    — Observe the due process of law in creation of demand. Prohibit decision without hearing, unless the concerned officer certifies with evidence, in his order, that notice was properly served but the taxpayer is avoiding to attend the hearing despite at least three giving hearings.

    — Process the verification etc as soon as application is received, before intervention of FTO.

    — Hold the person accountable, who prepares, signs and countersigns the comments/replies, which are factually incorrect or irrelevant.

    — Ensure that comments/replies to the FTO are verified by countersigning officers and the departmental representatives appear for hearing after full preparation and consulting the records.

    — Hold the chief commissioner/chief collectors accountable for promptly settling the jurisdictional issues.

    — Ensure cessation of harassment by opening a case which is under investigation, and requirement of specific permission from the chief commissioner for re-opening of old cases after giving reasons of having not opened the case before the taxpayer filed a complaint.

    — Issue directions for observance of office procedures to ensure that the documents received are properly preserved and maintained.

    — Pay attention to requests of aggrieved persons when they visit for pursuing their cases, by establishing help/complaint desk near main gate of offices. A senior officer should daily check the complaints for appropriate action.

    — Implement inspection regime of offices by senior officers to check pendency and other apparent irregularities.