Two tax officers suspended over Rs2bn refund to fuel company

The Federal Board of Revenue (FBR) has suspended two tax officers for approving a multi-billion rupee tax refund to Gas & Oil Pakistan Ltd (GO), despite orders from the Finance Minister to release the funds. 

The refund aimed to resolve a bottleneck hindering an $80 million Saudi investment in the fuel pump operator.

According to a news report, the FBR issued notifications suspending a commissioner and a deputy commissioner for 120 days, citing allegations from the Directorate General of Intelligence & Investigation that the Rs 2 billion refund was illegal. 

The refund, paid to GO, a key player in the energy sector, was part of a larger plan to facilitate Saudi Aramco’s acquisition of a 40% equity stake in the company.

The refund had been overdue for several months and was processed on direct orders from Finance Minister Muhammad Aurangzeb. The refund, listed as a receivable in GO’s balance sheet, was crucial for concluding the foreign investment deal. 

In response to the urgency, FBR offices were opened on May 28, a national holiday, to clear the refund. However, the Intelligence and Investigation Directorate later raised concerns about processing the refund on a holiday and flagged issues with the goods declaration dating back to October 2023.

Amid a significant revenue shortfall of Rs98 billion in the first two months of the current fiscal year, the FBR has delayed the release of overdue sales tax refunds. The tax authority faces immense pressure to meet the International Monetary Fund’s (IMF) quarterly revenue target, which necessitates raising nearly Rs1.2 trillion by the end of September.

In August, the FBR issued Rs53.3 billion in refunds, but September’s numbers are expected to fall short. This slowdown contradicts recent assurances from the finance ministry about the timely release of refunds, leading to frustration among exporters.