President validates FTO ruling against FBR to address excessive taxation in power bills

ISLAMABAD: President of Pakistan has granted its validation to verdict of Federal Tax Ombudsman (FTO) where it was directed to the Federal Board of Revenue (FBR) for addressing excessive taxation on electricity bills.

According to the FTO’s announcement made here on Monday stating that the FTO directive, urging the formation of a committee by the FBR to address excessive taxation on electricity bills, has received validation from the President of Pakistan. This decision follows the rejection of twenty representations filed by the FBR challenging the FTO’s orders.

Under Section 10(1) of the Federal Tax Ombudsman Ordinance, 2000, complaints were lodged by individuals, predominantly low-income earners, contesting the withholding of Income Tax and Sales Tax on their electricity bills. Despite their earnings falling below the taxable income threshold, they were subjected to various taxes, prompting them to seek recourse through the FTO.

The FTO’s investigation revealed a uniform imposition of Electricity Duty (ED) on consumers, regardless of income levels, exacerbating the financial burden on taxpayers. Furthermore, discrepancies were noted in the timely remittance of ED to provincial energy departments, with instances of misuse and misallocation of collected funds.

Of particular concern was the absence of clarity regarding the legal status of ED collection by distribution companies, raising questions about the legitimacy of associated taxes levied by the FBR. Additionally, revelations of cross-provincial discrepancies and outstanding dues highlighted systemic deficiencies in the taxation framework.

To address these issues, the FTO recommended the establishment of a committee comprising members from relevant departments, including LTO, Lesco, and Punjab Energy Department. This committee would devise strategies to review the entire ED regime and associated taxes, aiming to provide relief to ordinary consumers and taxpayers, FTO findings further added.

The president’s decision to uphold the FTO’s directive underscores the imperative of addressing the unjust taxation burden on citizens. It emphasizes the need for collaborative efforts among stakeholders to reformulate taxation policies, ensuring fairness and alleviating the financial strain on taxpayers.