Shrinking Customs’ revenues causing delay in refund claims issuance

KARACHI: The revenues of Pakistan Customs shrank after the government linked import of used cars with payment of duty/tax with foreign exchange, which resulted in delayed issue of Customs rebate claims, Advisor to Federal Tax Ombudsman (FTO) Shahid Ahmed said on Thursday.

“A larger chunk of Customs’ revenue came from import of used cars, while imposition of regulatory duties pushed commercial importers out of the system. Resultantly, Customs revenues came under pressure,” Shahid Ahmed said speaking at Pakistan Hosiery Manufacturers Association (PHMA).

The legal imports have shrunk significantly, and moved to illegal channels i.e. smuggling.

Shahid Ahmed informed that FTO was preparing the annual performance report for 2018, which would be presented to the President of Pakistan this month. “FTO received 2,400 complaints from taxpayers in 2018 as against 2,000 complaints in 2017. Of these 2,400 complaints, 72 percent were decided in favor of taxpayers, and refunds worth Rs6.89 billion were issued to the taxpayers.”

Earlier, President PHMA Jawed Bilwani said that sales tax refund deferred claims of exporters were stuck for over 15 years and urged the FTO to look into the matter. “Around 33 percent of the refund claims of exporters are deferred by the tax authorities,” he added.

Bilwani said that exporters should be facilitate, Presently, Customs authorities give approval to Duty and Tax Remission Scheme (DTRE), manufacturing bond and Export Processing Zone (EPZ) applications of the exporters, which took a considerable amount of time and formalities.  “These approvals should be given by the Ministry of Textiles, which already has all the details of exporters. If value-added export sector is facilitated, exports could be doubled in five years.”

Advisor to FTO Shahid Ahmed assured all support in addressing the genuine grievances of the industry. “The regulatory procedures need to be simplified through the use of technology, while there is a dire need to implement data inter-change between Inland Revenue and Customs to facilitate trade.”

Over Rs400 billion of refund claims – including sales tax, DTRE, export rebate – are stuck up causing severe liquidity crunch for the export oriented industry. Finance Minister had announced in the mini-budget that discountable promissory notes would be issued to settle Rs80 billion worth of claims, but the notes have not been issued as yet.

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