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ISLAMABAD: The intervention of the Federal Tax Ombudsman (FTO) has resulted in creation of huge tax demand and recovery of over Rs660 million in six mega cases of international non-governmental organizations (INGOs) operating in Pakistan.

Sources in the FTO office told Business Recorder that a number of the INGOs are executing projects of international donors in the country. These NGOs simply register as INGOs and have the status of INGOs in Pakistan. These INGOs are not charitable institutions and also not registered as charitable institutions in Pakistan.

Moreover, these INGOs are also not exempt from tax. Their income would be taxable and all withholding provisions are applicable on these INGOs. These INGOs have contracts of donor agencies and liable to pay withholding tax on payment of salary, project activities, funds disbursement, payments and other provisions of the withholding taxes. Even if these INGOs make payments abroad, their payments to non-residents are subject to the withholding taxes.

The FTO has observed that many INGOs are not filing their income tax returns. Those filing returns are not submitting the withholding statements. The FTO office has taken notice of the situation and informed the Federal Board of Revenue (FBR) to take immediate action in the matter. Keeping in view these mega cases of the INGOs, it seems that the role of the FTO has now become of a whistleblower.

NGOs, trusts & entities: FBR urged to issue instructions to PRAL to change status

The amount of Rs660 million is only partial recovery for a few past tax years of these INGOs, the actual amount recoverable is much higher in these cases, sources added. According to the FTO report, due to ineptitude, incompetence of FBR’s functionaries and delay caused in these cases ever since 2018 has resulted in tax proceedings barred by time in a number of cases for a number of Tax Years; another blow to the state coffers.

An own motion investigation was initiated by FTO in terms of section 9(1) of the Federal Tax Ombudsman Ordinance, 2000 (FTO Ordinance), on evidence-based information that some of the most meaningful and innovative initiatives of FBR’s own individual officers and field formations stands diluted and washed away due to systemic follow-up failure, ineptitude and incompetence, frequent posting transfers of officers and massive changes of jurisdictions.

Through its In-House Analysis, FTO Secretariat has also identified that though FBR and its dozens of field formations maintain an organized web portal, rich data centre, exhaustive Data Bases, elaborate and comprehensive operational soft wares and houses a full-fledged & home grown IT support system, i.e., Pakistan Automation (PVT) Ltd (PRAL), yet neither FBR HQs nor its any single field formation maintains:

a. any IT-based tracking system, archiving various valuable initiatives & ventures made by different FBR’s organizations, officers, teams or specially created cells from time to time.

b. any exhaustive, foolproof and IT enabled handling over module (from predecessors to successors) for such initiatives.

c. any institutionalized internal follow up system, or

d. any internal evaluation mechanism to gauge whether the goals envisaged under FBR’s flagship ventures have been logically pursued and achieved.

Therefore, in most of the cases the good job done is prone to be wasted, diluted or compromised with transfer of individuals, dissolution of units/ cells and takeover by new managers.

While conducting the aforesaid In-House Analysis FTO Secretariat focused on 34 potential cases of tax evasion wherein detailed Investigation Reports with a Case Study were prepared & shared by Directorate General (DG), BTB FBR in December, 2018, with the concerned field formations of FBR.

Subsequent action against Resident companies/ concern international contractors for not declaring true particulars of their receipts/ income and not discharging their responsibilities as withholding agents in the light of this initiative could have significantly augmented the national revenue. However, in 2019, FBR management suddenly shelved this whole BTB regime overnight; disbanding BTB Zones Islamabad, Lahore and Karachi. Office of DG BTB was relegated to a ceremonial entity assigned as an additional charge.

Copyright Business Recorder, 2022

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