Stress call: FBR presses corporate class to pay flood surcharge

Issues circular clarifying ambiguity about tax year.

ISLAMABAD:

In an apparent attempt to cover up an administrative blunder, the Federal Board of Revenue (FBR) issued a circular on Monday, asking the corporate sector to pay the pending 15 per cent flood surcharge as big businesses had refused to deposit the tax exploiting a legal lacuna left open by the tax machinery.

The 15 per cent surcharge, under the Income Tax Ordinance 2011, is payable by all taxpayers on their tax liability for tax year 2011, irrespective of whether their tax year ends on December 31, 2010 or June 30, 2011 or any other date, announced the FBR here late in the night.

Last week, FBR Chairman Salman Siddique had disclosed that the tax department could only collect Rs8 billion on account of flood surcharge after the corporate sector refused to pay the tax, arguing that their financial year ended in December and the new tax was imposed for the last quarter of financial year 2010-11. He agreed that the confused legal language of the ordinance provided an opportunity to the big firms to avoid the levy.

The government on March 15, through a presidential order, slapped a 15 per cent flood surcharge on all taxpayers for a period of three and a half months to raise additional money to rehabilitate flood-stricken areas of the country.

Parliamentarians also criticised the FBR for its administrative failure that rendered the ordinance virtually ineffective. Former information minister Qamar Zaman Kaira said due to scarcity of resources the government could not pay the remaining tranche of Rs80,000 to each of the flood-hit people.

In a meeting of the National Assembly standing committee on finance late last week, the FBR chairman said the actual flood surcharge collection target was Rs36 billion, an amount that was Rs16 billion higher than what the FBR announced earlier.

The entire collected amount of Rs8 billion was recovered from the salaried class.

According to the circular, “the FBR has made certain clarifications to the 15 per cent surcharge under Section 4A of the ordinance to address the queries being received by the board suggesting multiple interpretations of this section and to streamline the implementation of this time-bound provision.”

The circular further clarifies that the tax liability for the entire tax year 2011 may not be subjected to the imposition of surcharge and the same be levied on the proportionate liability for a period of three and a half months.

It is yet to be seen whether the corporate sector, particularly banks, comply with the latest circular and deposit the amount along with income tax returns.

The FBR says it may be noted again that the surcharge is to be computed at the rate of 15 per cent of the income tax payable for three and a half months on pro rata basis and the tax liability inclusive of 15 per cent surcharge so calculated is to be set off against the taxes withheld or collected in the tax year.



Published in The Express Tribune, September 13^th, 2011.