ISLAMABAD: The Federal Board of Revenue (FBR) can hold up to Rs390 billion in tax refunds at any given time under a condition linked to Pakistan’s International Monetary Fund (IMF) programme, officials told a Senate Standing Committee on Finance and Revenue on Thursday amid complaints of prolonged delays in refund payments.
According to a media reports, the lawmakers questioned why taxpayers were waiting years for refunds despite a new system intended to accelerate their processing. Committee members noted that refunds under the new system were expected to be processed within 72 hours and raised concerns over cases where legitimate payments had remained outstanding for several years.
FBR officials said the tax authority was not permitted under the IMF-related condition to retain refunds exceeding Rs390 billion.
They said around Rs197 billion in refunds had been issued during the first two months of the current fiscal year, compared with Rs157 billion during the corresponding period last year — an increase of Rs40 billion.
Around Rs500 billion in refunds were paid during the previous fiscal year, according to the FBR.
Officials said a new system had been introduced to reduce discretion in refund processing, with payments now being made systematically on a first-in, first-out (FIFO) basis.
The committee examined the case of chemical company Oleocorp, whose representative said more than Rs270 million in tax refunds had remained outstanding for the past six years.
The company said it produced glycerin for export to several countries but had struggled to recover taxes that it maintained were not payable.
Committee members said prolonged withholding of refunds adversely affected businesses’ cash flows and called for the matter to be resolved.
At the committee’s insistence, FBR officials assured lawmakers that the company’s case would be resolved within one month. The committee subsequently directed the tax authority to release the refunds and report back within 30 days.
Members also sought details of tax refunds over the past five years and called for the FBR to become more taxpayer-friendly. The committee was told that unnecessary delays should also result in action against officials responsible.
Separately, the committee was informed that payment of honoraria equivalent to five months’ basic salary to medical staff deployed during the budget session had been approved.
The payments, involving around 15 medical workers and a total amount of approximately Rs4.1 million, are expected to be made within days following instructions from the Ministry of Finance and Revenue.
The committee also received a briefing from the State Bank of Pakistan (SBP) on the implementation of Foreign Exchange Circular No. 16 of June 24, 1999, concerning payment of interest or profit on foreign currency accounts.
A detailed discussion was postponed after the SBP said the matter was sub judice and involved complications related to contracts between banks and depositors.
The committee directed the central bank to submit a written statement before it determines its future course and considers measures aimed at protecting foreign investment and depositor confidence.
