ISLAMABAD: Finance Minister Ishaq Dar on Saturday halted the Federal Board of Revenue (FBR) move to divert multi-million revenue collected from customers on sales invoices for the Inland Revenue Services welfare projects.

The news of the diversion of the tax collection circulated on social media and triggered criticism against the FBR chairman for making amendments to divert the funds to the Common Pool Fund (CPF) to use these funds for the welfare of employees.

The issue prompted the finance minister to come up with a clarification.

It said that keeping in view the current economic situation, Mr Dar has taken notice of the matter and directed the FBR to put the implementation of these rules on hold.

Soon after assuming charge of the Finance Ministry, Mr Dar halted the POS Prize Scheme through computerised balloting of invoices issued by Point-of-Sale (POS) of tier-1 retailers until Jan 31, 2023 on a plea to make it more inclusive.

FBR misses deadline to launch new prize scheme

It was stated through an official statement at the time of suspension of the draw scheme that it will be made more inclusive and participatory for the public. All invoices verified during the intervening period will be included in the next prize draw.

“The new scheme will be launched after discussions with tier-1 retailers, card acquirers, issuers, and other stakeholders. A new scheme would be launched very soon,” the FBR added.

The tier-1 retailers collect Re1 per invoice from customers under section 76 of the Sales Tax Act 1990. The first computerised draw was held on Jan 15, 2022 at FBR headquarters.

FBR announced prizes worth Rs53m including the top prize of Rs1m, two prizes worth Rs0.5m, four prizes of Rs0.25m and 1,000 prizes of Rs50,000 each, in the first draw. Since then FBR conducted 10 draws on the 15th of every month.

The scheme was introduced by the previous government to integrate tier-1 retailers with the FBR’s electronic system of real-time reporting of sales. FBR held out an assurance to IMF to take the number of POS to at least 60,000 in FY22 which was missed by a large margin and give Rs100m prizes per month and raise this amount to Rs1bn per month to encourage customers to demand computerised bills.

A domestic bank used this model to increase its deposits from a few million per month to Rs4bn. Turkey also successfully used the same model for documenting sales.

In November 2022, FBR issued an SRO2042 to suspend the prize scheme until Jan 31. Instead of improving the system further, FBR has amended rules to divert the funds generated through sales invoices for the welfare of employees.

An official statement of the finance ministry claims that FBR with the approval of the then federal finance minister levied a POS service fee of Re1 per invoice on tier-1 retailers. The purpose of the levy was explicit and duly included the welfare of IRS employees. This was notified vide SRO 1279 (I)/2021 dated Sept 30, 2021.

Under the provisions of section 76 (2) of the Sales Tax Act 1990, FBR is authorised to prescribe the mode and manner to expend such service fees/charges. Thereafter, FBR issued Common Pool Fund Rules for the welfare of its employees on Jan 16 with the approval of the Board-in-Council.

The heads of expenditure provided in the rules include financial assistance to families of the martyred, subsidy on marriage expenditure, health insurance, scholarships for the education of children, headquarter support allowance, fuel subsidy to the junior officers, IRS officers mess, house rent subsidy, support for widows and burial expenses.

Instead of issuing a new scheme after Jan 31, FBR has made rules to divert the funds for their welfare projects which were against the spirit of the launching of the scheme. It is worth mentioning that FBR is the only federal department that receives double salaries across the board.

Published in Dawn, February 5th, 2023