Tax collection bid: FBR announces tax amnesty scheme to lure defaulters

Penalties, surcharges waived on payment of actual taxes by June 30.

ISLAMABAD:

In yet another attempt to achieve the tax target, the authorities on Saturday announced an amnesty scheme for tax defaulters, waiving penalties and surcharges on all overdue taxes, as tax bosses need to collect another Rs115 billion in five days.

“If defaulters deposit the original amount from June 25 to 30, the Federal Board of Revenue (FBR) will write off all surcharges and penalties,” said FBR spokesperson Riffat Shaheen Qazi.

To give legal cover to the amnesty scheme, FBR has issued three separate statutory regulatory orders pertaining to income tax, sales tax and customs duties.

It is the second amnesty scheme in three months. The government has already offered an amnesty scheme to sales tax evaders in the textile industry in an attempt to broaden the tax base. In return for registering with the FBR, the government would not ask any questions from tax evaders about sources of income used to meet their start-up costs or the size of past revenues. This scheme is also valid until June 30.

The amnesty schemes are often regarded as a “moral hazard,” rewarding people for bad behaviour by legitimising their illegal activities and taking away the incentive from law-abiding taxpayers to stay within the law.

FBR also agrees to the notion but is ready to compromise in an attempt to reach the annual tax collection target of Rs1,588 billion. “To me, the most important thing is the annual target,” said FBR Chairman Salman Siddique. He said so far FBR has collected Rs1,473 billion in taxes. For June, it is required to collect Rs270 billion and so far it has bagged Rs161 billion.

Under the amnesty scheme, FBR has issued three separate SROs.

According to the customs notification, FBR would remit whole amount of penalties and surcharge payable by a person against whom an amount of customs duty is outstanding on account of any audit observation, audit report, demand notice or any adjudication order or who has failed to pay any amount of customs duty or claimed inadmissible refund or drawback of customs duty due to any reason, if the outstanding principal amount of customs duty is paid from June 25 to 30, 2011.

However, this will not entitle any person to claim or take refund of any amount of penalty or surcharge already paid or recovered from him before the issuance of this notification. Moreover, in cases where refund becomes due in consequence of a decision or judgment at a later stage, the customs duty deposited under this notification shall be refunded.

According to the sales tax notification, the federal government would exempt the whole amount of default surcharge and penalties payable by a person against whom an amount of sales tax or federal excise duty is outstanding on account of any audit observation, audit report, show cause notice or any adjudication order, or who has failed to pay any amount of sales tax or federal excise duty or claimed inadmissible input tax credit, adjustment, refund, drawback or rebate due to any reason, if the outstanding principal amount of sales tax or federal excise duty is paid from June 25 to 30.

But the benefit of this notification shall not be available to cases of fraudulent refunds or drawback and other tax frauds, said FBR.

In case of direct taxes, FBR notified that the government would exempt penalty and default surcharge in cases where withholding agents have not deducted advance withholding tax as required under the Income Tax Ordinance, 2001 or where withholding agents have deducted or withheld income tax but not deposited the tax deducted or withheld within due dates as prescribed.



Published in The Express Tribune, June 26^th, 2011.