Changes to tax laws

The government has introduced a host of changes to tax laws and on December 28, 2019, notified the Tax Laws (Second Amendment) Ordinance but waited till New Year’s day to announce it.

The ordinance was critical to meeting conditions set by the Financial Action Task Force (FATF) and to keep the country from falling into the task force’s blacklist. Amongst other things, the ordinance proposes a new set of penalties and punishments for carrying foreign currency and jewellery above $10,000 and 15 tolas respectively out of the country.

It also greatly alters the minimum tax for traders with a turnover of up to Rs100 million.

Moreover, the ordinance lowers the custom duties and sales tax imposed on cell phones costing up to $200. This will directly impact the less-than privileged citizens who purchase such phones.

The ordinance will allow information to be shared between the Federal Board of Revenue (FBR) and the Financial Monitoring Unit (FMU). A directorate is also being set up to crack down on evasion of taxes and duties, thereby meeting another key requirement for the FATF.

It seems unlikely that the government would have faced resistance from the political opposition on many of the changes introduced. Moreover, given the context, it could have been expedited through parliament. Many changes contained in the document seem to offer course correction from some of the harsher stances adopted by the government in previous budgetary documents.

The ordinance will be welcomed in many sectors, including traders and cheap mobile phone owners in particular. It is a welcome sign that the government while adopting harder stances against tax evaders is also listening to the public, though it would have been sweeter if it were with the full weight of parliament behind it.

Published in The Express Tribune, January 4^th, 2020.

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