President Zardari Says FTO Cannot Act as Revenue Maximizer or Policy Maker

President Asif Ali Zardari has ruled that the Federal Tax Ombudsman cannot assume the role of revenue maximizer or tax policy maker through the interpretation of tax laws.

The President accepted 11 representations filed by the Federal Board of Revenue against “own motion” findings and recommendations of the FTO in different cases and subsequently modified the tax ombudsman’s orders.

The President’s Secretariat issued orders on Tuesday clarifying the jurisdictional limits of the FTO office under the FTO Ordinance 2000.

President Zardari held that the powers exercised by the Federal Tax Ombudsman are circumscribed by the limits of jurisdiction defined under the law. He emphasized that the ombudsman’s role is restricted to addressing maladministration and cannot extend to academic questions, policy matters or interpretation of tax laws.

“The Ombudsman cannot assume the role of revenue maximizer or policy maker. Suggestions for improved governance fall within the executive domain,” the President stated in his order.

The 11 own motion notices issued by the FTO were related to sector-wise analysis, lack of symmetry in management of credit of withholding taxes, systemic gaps in the withholding tax monitoring system and huge tax evasion in the banking sector.

Other issues included the quality of amended orders passed by unit officers, the conduct of supervisory officers and discrepancies in the charging and collection of electricity duty.

The FTO had directed the Member IR Operations to implement a digital system integrating data from manufacturers, lessors and registration authorities to automatically verify advance tax payments. The system was meant to ensure correct crediting to lessees.

The FBR challenged these recommendations, arguing that the impugned orders suffered from jurisdictional error. The revenue authority placed reliance on orders passed by the Islamabad High Court in related cases.

Arguments for the FBR were heard at considerable length before the President issued his decision. While acknowledging that the definition of maladministration under the FTO Ordinance is inclusive and not exhaustive, President Zardari maintained that inclusiveness cannot be stretched to cover matters beyond the ombudsman’s statutory jurisdiction.

The President modified the FTO orders to the extent of directing the FBR to initiate departmental actions in a just and fair manner in accordance with law. He directed the Federal Tax Ombudsman to exercise jurisdiction within statutory limits.