Govt tightens noose around tax dodgers
The government on Wednesday introduced a bill in the National Assembly seeking to ban the purchase of cars, properties, and the opening of bank accounts by "ineligible persons." However, it proposed allowing non-filer family members of eligible persons to carry out such transactions.
In a likely controversial move, the government also sought parliament's nod to share taxpayers' confidential data with commercial banks and with privately-hired tax auditors. The Tax Laws Amendment Bill 2024, give private auditors all powers available under the income tax laws.
Finance Minister Muhammad Aurangzeb introduced the Bill in the lower house of parliament that also sought the powers to freeze bank accounts and confiscate businesses and properties of sales tax unregistered persons.
According to the bill, the ineligible persons would not be allowed to withdraw cash from their bank accounts beyond a certain limit. However, it gives certain relaxations to them, including the freedom to procure up to 800cc vehicles, buses, trucks and tractors and invest in shares up to a certain limit.
The bill -- conceived by Federal Board of Revenue (FBR) Chairman Rashid Langrial, in order to collecting due taxes from people, either filers or non-filers – allowed an eligible person to make major purchases of up to 130% of the value of cash and assets, declared in his last tax return and the wealth statement.
Unlike the announcement in the past, the government has not abolished the non-filer category from the law nor did it delete the 10th Schedule of the Income Tax Ordinance (ITO) that carries higher rates for the non-filers. Instead, the government introduced a new category of 'eligible person'.
The eligible person would be the one "who has filed a return of income tax for the tax year immediately preceding the year of transaction and has sufficient resources in wealth statement in case of an individual or financial statement in case of a company or association of persons", the bill said
"The eligible persons shall include his immediate family members the parents, spouse, and son below the age of 25 years, and unmarried, or widowed or divorced daughter or a differently impaired child. These persons can buy property, cars, invest in shares and maintain and operate bank account."
In the bill, 'sufficient resources' had been defined as 130% of the cash and assets declared by a person in his wealth statement filed for the latest tax year or in the case of a company or association of persons cash and equivalent assets declared in the latest financial statements, attached with the returns.
According to the FBR chairman, 60% of Pakistan's 67 million workforce was below the annual income taxable threshold of Rs600,000. The tax returns data processed by the FBR disclosed that the middle-income group taxpayers were 94% compliant, compared with 29% compliance by the 1% rich Pakistanis.
Against an estimated potential of 11 million filers, only 5.6 million filed their income tax returns by the end of November. The remaining people remained outside the tax net due to the system's inefficiencies, weak enforcement and political compulsions of successive governments.
Income tax
The government proposed to introduce restrictions on economic transactions by certain persons. According to a new Section 114C, an ineligible person cannot book, purchase or register a car of over 800cc category. However, the ineligible person can still buy a rickshaw, motorcycle rickshaw, tractors, pick-up vehicle having 800cc, trucks and buses.
The government has also proposed that the ineligible person cannot make a request to any authority for registration of any property more than a certain value. The value will be determined by the FBR through a notification. Also, the ineligible person cannot buy or sell shares, except for a certain value that the FBR would define through a notification.
The ineligible persons, which the FBR will notify, cannot open or maintain an already opened bank account, except Asaan account. They will not be allowed to withdraw cash beyond a certain limit that the FBR will determine.
The restrictions will take effect from the day the federal government will issue a gazette notification and these will not become effective soon after the approval of the proposed law by the National Assembly.
The government has also proposed to seek the powers to share taxpayers data with the commercial banks and the banks will then provide the names, account numbers of such persons where the banking information is at variance with the data algorithms.
The FBR is also facing a huge tax shortfall, which has already crossed over Rs340 billion in five months. It has not yet introduced any new tax measure in the bill. However, the possibility of bringing some changes in the tax rates cannot be ruled out before the approval of the bill, according to the officials.
Confiscation of goods
The government has also proposed to amend the Federal Excise Duty Act to get powers for seizing and confiscating the counterfeit cigarettes or beverages, which have been manufactured or produced unlawfully and other dutiable goods on which duty of excise has not been paid or there are no or counterfeit tax stamps, banderoles, stickers, labels or barcodes.
ST amendments
The government has proposed to get the powers to reduce the input tax refunds from the current level of 90%, based on an automated risk management system. The aggrieved business can file a complaint against any such decision in front of the concerned commissioner.
It has also proposed to place a bar on operations of bank accounts of sales tax unregistered persons. "The commissioner shall have the power to direct banking companies, scheduled banks and other financial institutions, through an order in writing, to bar operation of bank accounts of any person, who fails to get registered", according to the proposal.
It has also been proposed that the sales tax non-registered persons' immovable properties will not be registered to their names. Those persons who will not register with the FBR will face the risk of sealing of their business premises, seizure of movable property and the government will appoint a receiver for the management of the taxable activity of such persons.
ICT law
The government has also proposed amendments to the Islamabad Capital Territory Tax on Services Ordinance to make it binding for all service providers to integrate their businesses with the FBR.