The Federal Tax Ombudsman (FTO) has issued a directive to the Federal Board of Revenue (FBR), instructing them to immediately cease imposing penalties on businesses for delays in filing sales tax returns when such delays are a direct result of inaction by the tax department itself.
No Legal Basis to Prevent Filing, Says FTO
In a recent ruling, the FTO clarified that there is no legal provision within the Sales Tax Act of 1990 or the Sales Tax Rules of 2006 that prohibits a registered taxpayer from submitting their returns for the current tax period. This pronouncement comes as a significant relief to numerous businesses facing penalties due to circumstances beyond their control.
The FTO’s decision follows an “Own Motion” investigation initiated under Section 9(1) of the Federal Tax Ombudsman Ordinance, 2000. This investigation was launched after the FTO received multiple complaints from businesses alleging significant delays by Commissioners Inland Revenue (CIR) in granting necessary permission for filing sales tax returns. The FTO’s inquiry revealed that these delays were negatively impacting the business sector, particularly corporations, by preventing them from meeting their tax obligations on time.
Blocking Returns Violates Taxpayer Rights, Causes Financial Harm
The FTO strongly asserted that blocking the ability of registered taxpayers to file their sales tax returns constitutes a violation of their fundamental rights. Such actions, the Ombudsman noted, can lead to substantial financial losses for businesses, especially when they are consequently placed on the inactive taxpayers’ list. This designation, according to the FTO, disrupts crucial payment processes from suppliers, further exacerbating the financial strain on affected businesses.
Permission Requests Left Pending in CIR System
The FTO’s findings highlighted a specific scenario where a registered taxpayer who misses filing six consecutive sales tax periods is required to obtain permission from the relevant CIR to file the return for the subsequent period. However, the Ombudsman pointed out a critical flaw in the system: requests for such permissions were frequently left pending within the CIR’s electronic system, leading to unacceptable delays.
The Federal Tax Ombudsman emphasized that these delays are significantly detrimental to the government’s “Ease of Doing Business” initiative. The FTO urged the FBR to take immediate and effective measures to rectify this systemic issue and prevent further inconvenience and financial harm to businesses operating within the country. The directive from the FTO is expected to streamline the sales tax return filing process and ensure that businesses are not penalized for delays caused by inefficiencies within the tax department.
