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FBR denies loss of revenue due to reported flaws in PACCS

Federal Board of Revenue (FBR) has denied loss of revenue as reported in a section of the press attributing the loss of billions of rupees to flaws in Pakistan Customs Computerised System (PACCS).


In a press statement, FBR has referred to the news report claiming “FBR mistake costs exchequer Rs.2.26 billion”, which highlights that FBR failed to collect Rs.2.26 billion in 2008-09 because of incorrect computation and under assessment in 56 cases because of error in computing. The news report claims that FBR recovered Rs.1.021 (b) and Rs.1.183 (b) is yet to be collected. This is not the complete picture.


It is clarified that audit authorities had pointed out loss of revenue in 36 cases by interpretation of law. Therefore the impression given in the news that errors in computation resulted in loss of revenue is incorrect. Out of total of Rs.2.26 (b) pointed out by audit authorities, Rs.1.748 (b) relates to one case where Rs.129 million also stands recovered from it. Since the matter is sub judice and 15% is recovered, FBR is not invoking coercive measures at the moment. The balance amount will be taken up after decisions of appeals; therefore, FBR has completed the recovery process available under the law.


In other 35 cases, some audit observations are not valid and are contested. In the rest of cases the correct amount of tax has been charged and recovered. Some taxpayers are in appeals; therefore, FBR is not in a position to recover the tax through coercive measures. External audit and internal audit of the FBR, regularly conduct audit of taxpayers throughout the year and levy taxes. FBR collects billions of rupees through desk audit/audit tax returns every year. This is a routine exercise.


Another news report published in a section of the press also refers to potential loss of revenue of Rs.29 (b) in four areas of Withholding Taxes. The area reported for short recovery of withholding tax included profit on debt and dividends of Rs.13.696 (b) and Rs.21.987 (b). FBR also failed to collect Rs.9.128 billion as tax on dividend from 232 listed companies.


Audit & Accounts Department calculated this from accounting statements available on web sites of Banks and companies and based it on profit on debt/dividends. It did not take into account statutory exemptions i.e. payments to Government, widows, behbood certificates and exemption listed in Second Schedule where no tax is liable on profit on debt and dividend. The audit observation is therefore premature.


            The report that a sum of Rs.49 (b) (direct taxes) is stuck up in litigation and is subjudice should be viewed in the light of the taxpayers’ inherent right to approach a court of law. FBR, therefore, needs to wait for court decisions.

Hamid Raza Wattoo
Secretary (PR), FATE Wing, FBR
Jan 21, 2011
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