To be able to understand the extent and intensity of this malaise, that continues to plague the industry, trade and also the individual taxpayer, one can not help but notice that the occasion for refund arises because of the nature of tax process and procedures in vogue.
For instance about 70 percent of the income tax is collected through the withholding tax regime and if after the end of the financial year the withheld tax is more, which at least in the case of small and medium enterprises it is, then the need for a refund arises. Once the claim for refund is filed then the real circus starts.
For starters there is no response from the tax department. On pursuance of the claim by the taxpayer the department wants to see the original challans in respect of the tax withheld or in the alternative the taxpayer should have the same verified by the Data Processing Center (DPC) of the department.
More often than not, the person withholding the tax on behalf of the CBR, as its agent, does not provide the original challans for the tax deducted. In case of a multiple challan it is physically not possible to provide the original challan in any case.
The fact that this demand is outside the scheme enunciated in the law is of no consequence, if the taxpayer wants the refund claim to be processed then this requirement has to be fulfilled. Not only this, the last straw on the camel's back is that after having completed the tax challan verification procedure, whether through greasing the palms or influence or otherwise, the taxpayer literally has to beg for the refund as if alms are being asked for.
The tax officials have no hesitation in blatantly and shamelessly stating that the refund although fully documented and processed can not be given because it would upset the tax collection target.
The taxpayer therefore has to get in the queue of refund seekers as refunds are to be disbursed, if at all, under a programme chalked out by the department. If one wants to jump the queue then either influence is to be brought upon or a price paid for the refund to materialise.
Similar is the fate of refund claims for sales tax and customs duty. All posturing and claims of having streamlined this or that, is plain and simple balderdash.
The situation on the ground remains unchanged and it is either the nuisance value or connections or monetary gratification that gets the work done.
The more worrisome part is that all this is in the knowledge of the officials, high or low, of the Central Board of Revenue and fully condoned by them because it helps in attaining targets.
The fact that everything in the book is thrown at the taxpayer to block the refund is evident from a complaint before the FTO where an income tax refund claim was denied by the authorities on the plea that the taxpayer has been selected for audit under the universal self-assessment scheme (USAS).
This plea is in total violation of both the letter and spirit of the USAS, the FTO after hearing the case ruled that refunds can not be denied on the plea that the department has to conduct an audit of the taxpayer.
The law provides payment of additional tax as penalty for late payment of tax and conversely also provides for the CBR to pay compensation for late payment of refunds.
This provision does not exist in the Customs Act although it does apply to the income tax and sales tax laws.
The FTO's recommendation that the Custom Act be amended to provide such compensation is worthy of acceptance because the late payment of duty does entail additional cost.
Whether any taxpayer has ever been able to secure such compensation for late payment of refunds from the CBR is another matter and the answer to that is likely to be in the negative.
The recipient is lucky enough to get the refund, if it at all does, and has normally borne a cost for getting this refund so the question of daring to ask for compensation for the delay does not arise.
The Federation of Pakistan Chambers of Commerce and Industry (FPCCI), the various Chambers of Commerce and Industry (there are far too many of them) and the Trade Associations should get their act together and collectively pursue the government to put a stop to the arbitrary doings of the CBR.
We wonder what action has been taken against the officials who denied the refund claim on the plea that the case of the taxpayer has been selected for audit. Stern action by the CBR against such delinquents would go a long way in dispelling the impression that these dubious manoeuvres and trickery by its officials do not carry CBR's sanction.