ISLAMABAD: The Federal Board of Revenue (FBR) has claimed that tax evaders have been hindering its efforts to streamline tax collection and the ongoing stream of litigation only helps them delay the implementation of Track and Trace System (TTS).

The FBR made the argument in its reply recently filed in the Islamabad High Court (IHC) while defending challenge to award of a licence to a private firm for TTS implementation to trace and prevent leakage of billions of rupees in revenue.

While a contract with Ahmed Jaffer and Company (Pvt) Limited Consortium was signed by the FBR on March 5, 2021, it was challenged in the IHC by another firm, Reliance IT Solution, which was competing for the contract.

The IHC scrapped its similar contract with National Radio and Telecommunication Company (NRTC) in December 2020 after summoning the FBR chairman and seeking explanation for not initiating the process to hire a suitable firm for TTS despite court directive. Subsequently, the TTS licence was awarded to the private firm in March 2021.

Discouraging introduction of computerised monitoring allows sale of untaxed goods, IHC told

Responding to the challenge to the award of the TTS licence, the FBR said: “In order to prevent leakage of revenue, under-reporting of production and sales of tobacco, cement, fertilisers and sugar products and to ensure proper payment of Federal Excise Duty and Sales Tax on the manufacture and sale of the specified products, FBR is mandated to issue a licence for implementation of TTS.”

The licensing committee declared the Consortium’s bid as the “most advantageous bid” in terms of Rule 2 (h), 36 and 38 of PPRA Rules, 2004, the FBR stated.

Result of the bidding was communicated to all participants, including the petitioner, and uploaded on FBR and PPRA websites. Being aggrieved at the decision of licensing committee, four of the participants i.e. NIFT, SICPA, Reliance and Steuermarken filed complaints under rule 48(1) of PPRA Rules, which were dismissed.

The reply filed by counsel for FBR Syed Ashfaq Naqvi stated: “Tax evasion is a menace, which can only be curbed through use of computerisation of production lines. This non-intrusive, human interaction-free process of tracking and tracing the actual production, taking place in Pakistan, never suits tax evaders.

“The big picture of final beneficiary, who has benefitted in last 14 years, by halting/impeding, computerised monitoring of production lines sheds some light on ongoing stream of litigation which only paves the way for tax evasion. Production volumes nowadays have grown beyond human counting limits and discouraging introduction of computerised monitoring allows tax evaders to sell untaxed goods, causing huge loss to national exchequers.”

The FBR further claimed: “Tax evasion during last 14 years was made possible by causing impediments in installation of TTS in production lines. It resulted in having reliance on external borrowing which grew by 130pc in last 14 years. FBR is in process for last 13 years to implement the TTS to check the revenue loss.”

The licensing committee evaluated each of the bidders on the basis of an evaluation framework developed on the criteria provided in the Invitation For Licence (IFL). The criteria covered secure delivery of stamps from printing to delivery, strength of solution being offered, and security feature activation procedure, etc. The licensing committee evaluated the responses of each bidder as provided in their respective technical proposals and the two-hour demonstration/presentation opportunity given to each to explain their solutions, it added.

The FBR contended that the petition was not maintainable considering the settled law that issuance of tender notice, opening of financial bids, technical bids and contracts made could not be subjected to judicial review unless they were mala fide, illegal, unconstitutional and against the public interest. Court could interfere in tender or contractual matters, in exercise of power of judicial review, only if the process adopted or decision made by the authority was mala fide or intended to favour someone, it added.

Published in Dawn, April 4th, 2021