Governments create frameworks in which people do their business. Any amendment in rules and regulations of this framework compel businesses to change the ways they operate. Two major areas where a change affects the business directly are economic and legal policies. The most important component of an economic policy is the taxation system. Not only do the tax rates affect the business directly, but the way tax is charged, collected and if paid extra, refunded, also impacts the business. Almost on a daily basis, government functionaries who excel in the form of rhetoric claim to have both improved the ease of doing business and reduced the cost of doing business or are in the process of doing so. Every time the claim proves to be a mirage. The issue of the high cost of doing business coupled with the low ease of doing business is important for the entire business community. It does not hurt only the businesses directly targetetd by a government policy, it also creates a chain of the affected, each with some sort of a negative impact on their business. The government charges and collects sales tax under the Sales Tax Act 1990, and rules made thereunder with clear provisions that the sales tax, if paid more than the liability, is to be refunded within 60 days. Under the law, the FBR has to issue a Refund Payment Order within 60 days of the filing of a refund application. Originally, a senior auditor processed the refund, an assistant/deputy collector of the Sales Tax Collectorate issued an RPO, and a cheque was issued the next day. However, during the last 10 years, the government has attached so much importance to the routine matter of refund that sometimes the prime minister distributes the cheques in a ceremony attended by business glitterati, creating an illusion of a king distributing his largess among his subjects. The refund through bonds scheme shall not only increase the cost of doing business, but also reduce the ease of doing business Havnig failed to liquidate its Rs 200 billion liabilities to the business community accumulated over 10 years has announced the issuance of three-year maturity bonds to settle this liability. It has promised to issue the refund bonds in April 2019, and asked the FBR to issue the RPO of deferred amounts of sales tax refund by February 28. However, the FBR has neither issued the details of deferred amounts nor given any reason for not doing so, although it is all available to the FBR at the click of a computer key. The refund-through-bonds scheme shall not only increase the cost of doing business, it will also reduce the ease of doing business. Under the current system, the assessee applies for a refund along with all original documents; the FBR checks it, issues an RPO, and the amount is sent directly to the assessee’s bank account; it is just three steps. However, the refund-through-bond system has increased the steps from three to nine. After the issuance of an RPO, the assessee shall apply to the FBR Islamabad, requesting an issuance of bond; the bond shall be sent to the Central Depository Company, Karachi; the bond holder shall get an entitlement certificate (or some similar documents) to go to the bank for financing; the bank shall verify from the CDC the amount and other particulars; after verification, the bank shall decide to finance the bond at the then prevailing interest rate, which now is Kibor+ 2-3 per cent, around 16 per cent per annum; after three years, the bond holder may apply to the FBR Islamabad to redeem the bond; the bond can only be redeemed after three years; no time limit or procedure has been described for redeeming the bond. The job that was done in three steps shall now take much longer. It doesn’t stop here. The cost has also gone up. The government shall pay a simple 30 per cent cumulative interest for three years. The assessee shall have to pay a minimum of 48 per cent cumulative interest: he shall be getting 18 per cent less refund, or in other words, shall be giving a ‘discount’ of 18 per cent to the government to get his rightful refund. Businessmen would have perhaps accepted that with a pinch of salt had this 18 per cent gone to the government’s kitty. Let us see who is going to benefit, and who is going to lose from this bond scheme. Obviously, banks whose earnings – if the entire Rs 200 billion refunds are paid through bonds – shall increase by Rs 96 billion rupees from lending against a 100 per cent secured loan. Government shall be losing 60 billion rupees, and the hapless businessman shall be losing 36 billion rupees. The writer is a chartered accountant