The Senate Standing Committee on Finance on Monday denounced the Federal Board of Revenue’s (FBR) highhandedness against taxpayers, who have been served with notices having value that is many times more than their annual sales amid a sharp surge in tax demand to Rs2.4 trillion.
“I was shocked to see that the FBR issued a tax recovery notice of Rs65 million in a case where the total turnover of the person was Rs5 million per annum,” said Senator Talha Mehmood, Chairman of the Standing Committee.
The officers who issued such ridiculous notices should be handcuffed since the FBR was blackmailing the taxpayers through audit notices, said Mehmood.
The FBR has been serving tax notices despite Finance Minister Shaukat Tarin’s order to stop giving notices.
The development came amid increasing fear among the business community over the budget proposals to arrest the taxpayers on suspicion of concealment of income and link the relief with payment of 100% of tax demand.
FBR sources told The Express Tribune that tax demand had jumped to Rs2.4 trillion, which was almost half of the FBR’s annual tax target of Rs4.963 trillion. Just two months ago, the figure was Rs1.7 trillion, showed the Ministry of Finance monthly economic update.
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Mehmood directed the FBR to submit a report on the inclusion of a director of a tobacco company in the tax anomaly committee, which was set up this week.
“The existing taxpayers are planning to run away due to the highhandedness of the FBR and the FBR is talking about expanding the tax base,” said Sohail Altaf, a businessman.
Altaf said that initially the business community had hailed the budget, but an in-depth review showed how dangerous the budget was for the businesses.
The standing committee also showed its reservations about proposed amendment in Section 127 of the Income Tax Ordinance that created a link between the tax demand and the right to appeal.
“The amendment in Section 127 is against the fundamental right to appeal,” said Senator Farooq H Naek of the PPP.
“No appeal shall be made by a taxpayer against an order of the assessment unless the taxpayer has paid the amount of tax due under Section 137 (which deals with payment of all types of taxes),” said the proposal.
However, the FBR said that the law relating to clearing the admitted tax liability that the taxpayer himself had worked out, on the basis of returned income, had always been on the statute book.
Dr Ikramul Haq, Advocate of the Supreme Court and a tax expert, has a different point of view.
The proposed amendment in Section 127, if approved, would be a violation of the Constitution - the supreme law of the land, said Haq. He feared that it would also give a free hand to the officers of Inland Revenue Service of the FBR to collect 100% of the disputed tax demand upheld by the Commissioners of Appeals and that would also be a violation of Article 10A of the Constitution.
Demanding 100% of the disputed tax before final adjudication by an independent appellate forum is a gross violation of the fundamental right guaranteed by the constitution for free access to justice.
Haq raised a question whether the FBR would pay refund immediately if the order was in favour of the taxpayer.
He said that it became almost impossible in a majority of the cases to get relief at the first level of appeal. The Commissioners of Appeals of Inland Revenue work directly under the administrative control of the FBR, which is also against Article 175(3) of the constitution.
The standing committee also turned down a request by the finance minister to propose amendment in Section 203A that seeks powers to arrest people on suspicion of concealment of income.
“We out rightly reject the amendment to empower the government to arrest people on suspicion of concealment of income,” said Senator Talha Mehmood.
The standing committee pended a decision on a budget proposal to reduce regulatory duty on export of molasse. Pakistan Sugar Mills Association Chairman Iskandar Khan agitated the reduction in duties, saying it would discourage export of ethanol, which currently stands at $500 million.
Ministry of Commerce Joint Secretary Mohammad Ashfaq said that the duties have been lowered on the demand of the European Union. He said that the EU allows duty free imports from Pakistan but we had imposed regulatory duty on exports.
Published in The Express Tribune, June 22nd, 2021.