FTO orders audit of medical college filing NIL tax returns 

ISLAMABAD: Taking notice of Nil Income Tax Returns filed by a medical college since its registration in 2017, the Federal Tax Ombudsman (FTO) has directed the Federal Board of Revenue (FBR) to undertake a comprehensive audit of the institution to trace tax evasion, if any.

The FTO Secretariat has initiated an investigation into the tax affairs of the Watim Medical College (WMC), referencing OM No.0044/OM/2023.

Currently the country has 75 medical and 43 dental colleges operating with approval of the Pakistan Medical and Dental Council (PMDC). Despite the structured regulatory oversight provided by PMDC, the tax-related concerns of these private institutions have been overlooked by the FBR.

In recent years, various medical-related websites have regularly highlighted irregularities and violations of tax laws by private medical colleges in Pakistan.

One notable concern is maladministration and irregularities committed by trusts overseeing medical colleges. This includes improper compliance with withholding taxes, failure to adhere to the stipulations associated with NPO status, irregularities in issuing approvals under section 2(36) of the Income Tax Ordinance 2001, and the absence of a well-structured audit for withholding taxes.

Expressing regret, the FTO office noted that despite the admission of filing ‘Nil’ Income Tax Returns by the WMC for the past five years, the department failed to investigate this situation.

Private medical colleges, known for their profitability, with substantial annual receipts, have faced inaction and ineffectiveness from the Corporate Tax Office (CTO), the FTO deplored.

Reports reveal that WMC, registered in 2017, has consistently been submitting Nil withholding tax statements under section 165 of the Ordinance, 2001, indicating an attempt to evade taxable responsibilities, yet the CTO has shown no initiative in addressing this issue. There is no record of any withholding audit being conducted by the department.

Despite the college's website displaying a breakdown of local receipts, fees from overseas and foreign students, there has been no effort in the past five years to reconcile this information with the college's foreign currency and PKR accounts.

The CTO has not investigated this potentially lucrative revenue source, in operation since 2017, neither any information has been obtained regarding any donations received by the college.

Despite the college's website boasting a highly qualified faculty, the CTO has provided no information regarding this aspect or tax withholding under section 149.

These omissions and commissions are considered maladministration under section 2(3)(ii) of the FTO Ordinance, 2000.

In light of the above, the FBR has been directed to instruct the relevant Commissioner-IR to conduct a comprehensive audit of the concerned college. The Commissioner-IR is required to ensure proper withholding statements are filed and conduct a thorough withholding audit for previous years, and submit a compliance report within 60 days.