CBR seeks Finance Ministry approval on major taxation issues

ISLAMABAD (January 29 2006): The Central Board of Revenue (CBR) has taken up four major taxation related issues with the Ministry of Finance for improving revenue operations, issuance of refund to banks and enhanced autonomy to tax officials.

Sources told Business Recorder on Saturday that CBR is co-ordinating with the Ministry of Finance to finalise issuance of bonds to banks in lieu of income tax refund; sales tax collection from Wapda/KESC; autonomy, problems and changes in rules/regulations to streamline reconciliation of revenue receipts with the State Bank of Pakistan and AGPR.

The Board-in-Council was informed to that the matter pertaining to issuance of bonds, to banks, in lieu of income tax refunds has been presented to the Finance Ministry. Senior tax officials opined that CBR has issued refund to the banks during fiscal 2005-06.

It is a regular feature to pay income tax refund to the banks and the refunds are not withheld by the income tax department. A few years back, bonds were issued against income tax refunds to the banks. It may be pointed out that certain banks have also demanded compensation under the Income Tax Ordinance 2001.

The second issue relates to the recovery of sales tax dues from Wapda/KESC. The CBR had issued new procedure for the payment of sales tax by Karachi Electric Supply Corporation (KESC) through SRO 1236(I)/2005.

The input tax adjustment would be admissible to KESC in proportion to the quantum of electric power billed during the tax period. In case of KESC, sales tax shall be paid on the basis of supply of electric power billed to the consumers after adjustment of input tax.

Sources said that the KESC has not agreed with provisions of SRO 1236(I)/2005 regarding input tax adjustment. Consequently, the CBR has approached the Ministry of Finance for guidance and settlement of the issue.

Thirdly, the CBR has sought more autonomy from Ministry of Finance for carrying out functions independently. Recently, the World Bank has conveyed to the tax officials to effectively use the powers given by the Cabinet Committee on Fiscal Reforms (CCFR) for timely completion of ongoing reforms program.

To facilitate reform implementation, it is critical that the powers delegated to CBR by the CCFR should be exercised properly by the tax officials.

The government needs to clarify the delegated powers of CBR to relevant ministries to prevent unnecessary delays in future. The financial and operational autonomy to the CBR would empower its chairman to exercise 17 new powers. Presently, the CBR Wings are examining these proposed powers for implementation.

The CBR has also demanded powers to sanction lump sum provision. The CBR Chairman should be authorised to issue supplementary grants without approval of Finance Division within the sanctioned budget demands. The CBR chairman should be authorised to sanction honoraria/reward. He should have full powers to incur expenditure on repair of the hired and requisitioned buildings.

Fourth, the CBR has asked the Finance Ministry to guide the tax officials in streamlining the procedure for reconciliation of revenue receipts with the State Bank of Pakistan and AGPR.

The CBR has approached the Ministry of Finance to seek legal backing for smooth implementation of the banking automation system, enabling taxpayers online challan deposit services. Ministry of Finance will give legal cover to this automation project.

Under the system, banks would give a 'computer generated payment receipt' to the taxpayer, while the authorised NBP branches would daily transmit revenue figures of tax deposited to the tax department.

In this regard, relevant procedures including 'Treasury Rules' would be amended, sources added.

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