An unethical move, FBR has notified new rules to divert taxes and fees. The FBR has quietly notified IRS Common Pool Fund Rules 2023 without seeking prior approval of the federal cabinet.

ISLAMABAD ( Web News )

In an unethical move, the Federal Board of Revenue (FBR) has notified new rules to divert taxes and fees for the distribution of allowances among its officers including the chairman and other personal benefits of officers belonging to the Inland Revenue Service (IRS) Shehbaz Rana reported.

The illegal step has been taken at a time when Pakistan is engaged in talks with the International Monetary Fund (IMF) over new taxes to avoid default. The new rules show the apathy of taxmen towards the grave economic situation besides highlighting their vested interests.

The FBR has quietly notified IRS Common Pool Fund Rules 2023 without seeking prior approval of the federal cabinet. However, it defended the diversion of taxpayers’ money for personal use, saying “FBR’s salary is not even equivalent to half of the salary of FIA, IB, NAB, PAS, PSP and other civil service groups”.

The rules showed that the IRS Common Pool Fund would be fed by up to 90% of the collection of “Point of Sale (POS) Service fee”. Every citizen pays Re1 on every invoice at the time of shopping – a collection that runs into hundreds of millions of rupees, which will now be used for the personal benefit of taxmen. The Re1 levy had been imposed to raise funds for technological upgrade of the POS system, which the FBR has tried to install to capture true sales of businesses.

The rules stated that the fund would be fed by the rewards distributed under the Inland Revenue Rewards Rules of 2021 – another way of giving additional perks to taxmen over and above their salaries.

Similarly, the Common Pool Fund will be fed through the “grants received and approved by the Board-in-Council and the profit earned from investment”.

However, the FBR is a revenue-collecting body and cannot indulge in making investment.

“No government body or department can issue rules without approval of the federal cabinet,” said a former cabinet secretary.

The notification showed that taxpayers’ money would be utilised for paying the “headquarters support allowance” to all grade 17 to 22 officers. Grade 17-18 officers will receive a monthly allowance of Rs20,000, grade 19-20 officers will get Rs30,000 monthly allowance and grade 21-22 officers will get an additional Rs40,000 monthly allowance.

All FBR members and its chairman are in grades 21 and 22, who will now receive a monthly allowance of Rs40,000 out of the POS fee.

FBR’s bureaucrats will also receive monthly house rent subsidy of Rs25,000 to Rs35,000 – the maximum for the chief commissioners, members and chairman of the FBR.

They will use the POS money for officers’ mess, according to the new rules.

Documents further revealed that annual scholarship for the education of one dependent child of an IRS official (up to BS-07) would be provided through the Common Pool Fund.

When inquired whether the FBR sought the cabinet’s prior approval of the IRS Common Pool Fund Rules 2023, an FBR spokesman said that the “strength has been derived u/s 222A (2) of the Income Tax Ordinance, 2001”.

It seems the FBR has misinterpreted Section 222A (2), which states “the board may authorise and prescribe how fee and service charges collected including by ventures of public-private partnership under this section are expended”. The section does not give exemption from cabinet’s approval.

To a question whether there is any justification for using 90% of POS fee for the personal benefits of tax officers, the spokesperson replied “only Re1 is being charged in the wake of POS service fee, which is very meagre as compared to utilisation of this fee for various defensible purposes”.

The FBR did not deny that it was using the POS fee for personal benefits.

To another question about the source of Board-in-Council grants, the spokesman said “there are no Board-in-Council grants at this point”.

When asked whether the FBR took permission from the Ministry of Finance to park taxpayers’ money in ABL and how it is justified to earn interest on money that taxpayers pay for POS, the spokesman claimed that “no deviation from law or procedure has been done and an old account is being used for the purpose”.

However, the reply seems contrary to the ground realities. The IMF has asked Pakistan to close all bank accounts maintained by government entities. The FBR spokesman said that there was also a similar support mechanism for other civil service groups. But two wrongs do not make one right.

Published in The Express Tribune, February 4th, 2023.