ISLAMABAD: A parliamentary panel recommended the government to partially relax restrictions on non-filers of income tax returns from purchasing property and new vehicles, while also seeking to double the tax-free limit of cash withdrawal from banks to Rs100,000 a day.
The Senate Standing Committee on Finance recommended relaxing restrictions at a time when tax authorities have proposed some steps to broaden the narrow tax base in the federal budget 2018-19.
However, the committee backed the government’s proposal to lessen the reporting requirements for commercial banks with regard to seeking information about depositors.
Budget 2018-19: As non-filers barred from purchasing new vehicles, auto sector set for a surprise
PPP Senator Farooq H Naek heads the committee that is discussing the Finance Bill 2018-19 threadbare.
The standing committee conditionally endorsed the government’s proposal to impose new restrictions on purchase of property and vehicles by the non-filers of the income tax returns. The government has proposed that the non-filers cannot buy these assets from fiscal year 2018-19, starting from July.
The committee has instead recommended that the non-filers of income tax returns should be allowed to buy or import cars of up to 1,000cc with an aim to facilitate the middle income group. The committee also recommended that the non-filers should be allowed to purchase residential homes and plots measuring up to 10 marla or its equivalent in square yards, which is about 302.5.
Imposing limits on non-filers is a good proposal that can go a long way to expand the tax base but the government’s restrictions are too harsh, said PTI Senator Mohsin Aziz.
The committee also unanimously rejected the government’s proposal to acquire the first right to buy property, if it is declared, in its view, below the fair market value price.
Pakistan faces serious problem of an extremely narrow tax base, as only 1.26 million people file their annual income tax returns. However, majority of the population pays taxes in shape of withholding taxes but they do not file returns.
The standing committee recommended the government to enhance the tax free cash withdrawal current limit of Rs50,000 to Rs100,000 a day. The Federal Board of Revenue (FBR) charges 0.3% withholding tax from filers and 0.6% from the non-filers of income tax returns on cash withdrawal exceeding Rs50,000 a day.
This limit is too low and there is a need to adjust it upwards, said Senator Farooq Naek. The FBR had set the tax free cash withdrawal limit at Rs50,000 six years ago.
However, the committee supported the FBR’s proposal to lower the reporting requirements for commercial banks. Against the current requirement of reporting all banking transactions of over Rs1 million, the FBR has proposed the new limit at Rs10 million. The banks will no more be required to give online access to the FBR. The banks will also not give the Suspicious Transactions Reports and the loans write off information to the FBR.
The FBR has also proposed an important step of denying filers withholding tax rates to those people who would file their annual income tax returns after the last due date. The committee endorsed this proposal. According to the proposal, if a person files annual income tax return after the due date, his name will not appear on the Active Taxpayers’ List (ATL). Only those whose names are on the ATL can avail low withholding tax rates while conducting various transactions. The business entities that will file their returns after the due date will not be entitled to claim tax credits on account of losses.
Member Inland Revenue Policy of the FBR Dr Mohammad Iqbal assured the committee that this year the government will not extend the last date of filing the income tax returns beyond September 30.
On the insistence of former finance secretary Dr Waqar Masood, the committee asked the FBR to review the new reduced rates proposed for the individuals. Dr Masood wanted that these rates should not be reduced. The committee will give its final recommendation today (Tuesday).
Tax amnesty offers no escape from prosecution
The committee proposed the FBR to increase the penalty for non-filing of income and wealth statement by those resident Pakistanis who own offshore assets. Against the FBR’s proposal to charge 2% of the amount in penalty, the committee has asked the authorities to align the penalties with those prescribed for non-filing of the domestic assets statements.
The standing committee also endorsed the FBR’s proposal to change the withholding tax regime for the commercial importers. Against the existing provision of treating the 6% withholding tax paid by the commercial importers as its final liability, the FBR has proposed to treat it as minimum liability that will require the importers to file their returns.
Published in The Express Tribune, May 8th, 2018.
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