Rs 43 billion irregularity in FBR audit: PAC chief forced to refer matter to DAC for reconsideration

The audit paras for 2013-14, which pointed out Rs 43 billion loss to the national kitty, forced the chairman Public Accounts Committee (PAC) to refer the matter to departmental accounts committee (DAC) for reconsideration after officials from both Federal Board of Revenue (FBR) and Auditor General of Pakistan (AGP) came down hard on each other.
Concessions in duty, exemptions and zero rating of tax notified under statutory regulatory orders (SROs) caused a loss of Rs 5.8 billion to the national exchequer, but the audit officials contradict the claim made by the FBR officials. The committee, which met here in the chair of Syed Khursheed Ahmed Shah, turned into a fish market after officials both from FBR and AGP, especially women, verbally attacked each other. The PAC members Sheikh Rasheed Ahmed, Mehmood Khan Achakzai, and others took stock of audit paras of 2013-14 for Ministry for Finance and the Ministry for Law and Justice.
"Both AGP and FBR are respectable organisations and I don't allow you to fight each other, so let me send the audit paras back to DAC for reconsideration, so that we can easily sort them out and report back by December 7," remarked Shah. The audit officials plainly told the top parliamentary watchdog that FBR did not make recoveries, and in 2013-14, over Rs 6 billion customs duties were waived off.
Another shocking revelation which further exposed the FBR, according to audit officials, was that the board suffered a massive revenue loss of Rs 5.8 billion on account of non-recovery of inadmissible concessions and exemptions and wrong tax concessions granted by tax officials to different sectors/industries during 2013-14. The audit officials said the massive irregularity was identified in 2013, but nothing had been done on it so far. However, the FBR officials came with an interesting reply saying some Rs 3.1 million recoveries had been made while efforts were under way to recover remaining amount of Rs 395 million.
In another twist to the massive Rs 5.8 billion irregularity, the FBR officials had nothing substantive to say except declaring the audit objection "controversial." The only justification for the massive tax exemption, which the FBR officials completely relied on to burry the issue under the carpet forever, was that defence machinery worth millions of rupees were imported on which lump sum tax was paid.
The FBR officials tried their level best and kept explaining the different sections of Customs Act, 1969, and said that machinery related to defence could not be taxed due to security reasons. However, the committee member including its chairman did not move an inch despite lengthy clarifications given by FBR officials who moved from pillar to post to settle the audit objection once for all, and referred the issue back to DAC with directives to report back on December 07.
Rashid Godel, a member of the committee raised objection over supplementary grant to the FBR, saying: "You people are the kings of the ring and simply damn care where to spend the money...at least follow the laid down rules to spend this money." Chairman FBR Nisar Muhammad Khan, a career customs officer, stated that there was no post of CFO in FBR, which forced the PAC chairman to reprimand the top chap, saying: "Come prepared next time [and] it looks as if you have no idea what we are asking from you."
The FBR chairman said that some Rs 300-400 billion could not be recovered due to litigations, adding the issue which the FBR facing was that the Board could not hire a lawyer having fee more than Rs 1 million. "Ten Model Custom Collectorates (MCCs) extended the benefit of exemptions and concessions of duties and taxes under certain SROs without fulfillment of requisite conditions which resulted in non-realisation of Rs 5.8 billion revenue," the report said.
Defending these exemptions, FBR Chairman Nisar Mohammad Khan said a sizeable amount related to the defence imports, adding due to the security reasons, neither the forces disclosed any details about their import nor the customs authorities could check items in the consignment meant for the defence forces; therefore, the FBR could charge certain amount of taxes on the defence imports.
"There is a system based on mutual understanding under which a lump sum amount is imposed on the defence import as tax," he explained. However, he said since the policy related to issuance of SROs by FBR had been abolished; therefore, it was not possible for the revenue board to offer such concessions in future. Audit officials on the other hand argued that the stance of the FBR was rather ambiguous.
They said FBR under the SROs exempted tax for the import of tables, chairs and other items which were produced locally whereas under the government's policy it could not offer any concession for the import of such products as it would discourage the indigenous manufacturing.