The Federal Board of Revenue (FBR) has obtained stay orders against the Federal Tax Ombudsman’s (FTO) decision to inspect offices dealing with offshore tax haven cases, blocking a move that could have unearthed reasons behind poor recovery of $22 million against $1.3 billion worth cases.

It is rare that a government department has gone in the courts against a constitutional office that is responsible to check corrupt practices in the tax machinery. The matter appears serious as stay orders have been obtained to block the move to scrutinise offshore tax havens related record, shared by Europe-based Organization for Economic Cooperation and Development (OECD) with Pakistan.

The FBR has secured multiple stay orders from Lahore, Islamabad, Peshawar and Sindh courts during the past few weeks, including two stay orders against the FTO’s decision to inspect Karachi and Islamabad Automatic Exchange of Information (AEOI) zones. The other stay orders were related to domestic tax cases being handled by Lahore, Faisalabad, Islamabad, Peshawar and Karachi offices.

Due to complaints of “malpractices with corrupt motives”, the FTO office had taken a suo motu notice and launched probe to determine as to why FBR’s three field offices were failing the prime minister and the nation in recovery of presumably $200 billion stashed abroad.

PM Imran Khan had promised to recover the $200 billion worth of looted money.

Read more: FBR holds tax concession for overseas Pakistanis

The FTO, in April this year, had served notice on the FBR, directing it to nominate officials for inspection of the three zones. The FTO had ordered the inspection of all the three offices on complaints of malpractices with corrupt motives in the discharge of duties, falling within the ambit of maladministration.

Now, the commissioners of the two zones have gone to the courts and gotten the FTO’s orders suspended.

“It was not the decision of the board to file petitions in the courts rather this was individual action of the respective commissioners,” said Dr Mohmmad Ashfaq, Director General International Taxes and Member Operations of the FBR while talking to The Express Tribune. He said that the FTO never shared the details of the alleged corrupt practices with the FBR.

However, the move appears well-coordinated as these grade-20 officers cannot make such bold moves without support from their bosses.

FTO Mushtaq Sukhera has also taken up the issue with President of Pakistan Dr Arif Alvi. However, the president instead advised him to take up the matter with Special Assistant to Prime Minister on Revenue Dr Waqar Masood Khan, according to sources privy to these discussions.

Under the law, the FBR can file a representation before the president against the decisions of the FTO. But the FBR did not choose this legal path. “The FBR could have approached the president, had the decision to obtain the stay order been taken by the board,” said Dr Ashfaq in response to a question.

The FTO took suo moto action after the official record disclosed that the FBR headquarters forwarded $2 billion worth of 1,579 cases to three AEOI zones of Karachi, Lahore and Islamabad but the recoveries in about 1,150 cases were a mere $30 million as of March.

In case of Islamabad and Karachi, the recoveries were just below $22 million as of end March.

The foreign currency accounts of Karachi AEOI zone reflect tax assessed was alarmingly low to the Lahore and Islamabad zones, according to the official documents. These papers showed that about 275 cases are yet to be decided out of total 899 assigned cases to the Karachi zone.

The FBR headquarters forwarded Rs152 billion or nearly $1 billion cases to the Karachi zone, which recovered hardly $19 million or Rs3.1 billion. The zone had determined the taxable amount of just Rs22.8 billion. The sources said that the FTO wanted to ascertain whether the Karachi zone accurately made these assessments or there was mala fide behind it.

Similarly, in case of Islamabad zone, the FBR forwarded Rs59.5 billion cases but the zone could recover hardly Rs305 million or $3 million.

To make the investigation transparent, the FTO wanted to take an officer of the FBR nominated by the FBR chairman. But the FBR never gave its nomination and instead chose to go to the court.

“If the FBR has not chosen to nominate its representatives on the proposed inspection teams, the FTO may proceed on its own without FBR representation as also referred to in your latest correspondence,” the FBR told the FTO on July 2.

The FTO has also sought an explanation from the FBR chairman and member IR operations for not implementing its orders to nominate the officers.

But the FBR informed the FTO that any further proceeding in the case may be pended till final disposal by the court cases, according to the FBR correspondence with the FTO office.

While defending the FBR officers’ decision to knock the court doors, Dr Ashfaq said that the FTO never shared the details about the complaint and the name of the complainant that could have determined that there was any mala fide behind low tax recovery in offshore cases.

He said that the entire OECD information was not actionable and there were many pitfalls.

Published in The Express Tribune, July 27th, 2021.

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