KARACHI (January 22 2010): The Federal Board of Revenue is going to issue investment bonds to banks to swap tax refund liability of around Rs 15 billion. Sources told reporters on Thursday that the modalities in this regard are being finalised as Pakistan Banks Association (PBA) has accepted the proposal.
Sources said the Large Taxpayers Unit (LTU) has been directed to determine the total tax refund liability of the financial institutions for the purpose.
The sources added the tax refunds of around Rs 15billion of some 30 banks have been pending since 2002. The sources said the restriction of manual overruling in the past has blocked around Rs 40billion refunds comprising both direct and indirect taxes of some 1000 taxpayers enrolled in LTU since 2002.
They said the board has now lifted this restriction and has authorised BS 19 officers manual overruling, which was earlier done by BS 16 staffers. They said the board has convened a meeting to make suitable amendments in the FBR web portal in this connection.
Sources said banks are required to produce agreement-letter regarding the settlement of refund claims to acquire investment bonds. They said the board had introduced the concept of investment bonds in 2002 and had issued Pakistan Investment Bonds to pay off its tax refund liability.
According to the term sheet for swap of banks tax refund liability against the FBR, which was made in 2002, the bonds were issued at par value with a maturity period of three-, five- and 10 years. And the coupon rates were 8.37 percent, 9.39 percent and 10.54 percent, respectively.
The bonds were redeemed on maturity with bi-annually mode of profit payment. The bonds were negotiable and eligible for SLR and repo and the account in this regard was maintained by State the Bank of Pakistan through SGLA. The board deducted the tax at source on the profit accrued thereon as per the rules.