Federal govt denies provinces tax data access
The federal government has refused to share income tax returns of taxpayers with the provinces because of the confidentiality laws amid lack of consensus between Punjab and the Centre on the right to tax the livestock incomes.
The refusal comes in the middle of the federal government's proposed amendment to give access to the taxpayers' data to private auditors and commercial banks. Government sources told The Express Tribune that the issue of a lack of data sharing was discussed during a meeting of the National Tax Council (NTC).
The meeting was held early this month with Finance Minister Muhammad Aurangzeb in the chair. The sources said that the finance minister emphasised the need for two-way data sharing between the federal and the provincial governments, including sharing the income tax data.
The NTC was told that the Section 216 of the Income Tax Ordinance (ITO) barred sharing of the taxpayers' data with other parties. It was further informed that complete returns could not be shared because of the confidentiality under Section 216 of the ITO, the sources added.
However, the Federal Board of Revenue (FBR) showed willingness to share any specific data with the provinces that fell in their domain – the agriculture income and the property income.
FBR Chairman Rashid Langrial assured that the provincial request for the specific data rows from the income tax returns received from provinces would be examined for its relevance to provinces' revenue generation, nature of income, category of taxpayers, said the sources.
People holding big lands and also doing other businesses often declare their business income as agriculture income to evade taxes. To address the problem, the International Monetary Fund (IMF) asked Pakistan to bring agriculture income tax rates at par with the federal income tax rates.
The current maximum agriculture income tax rate is 15% compared to 50% federal personal income tax rate. The FBR maintained during the meeting that the legal restrictions, if any, regarding data sharing, would have to be taken into account, according to the sources.
The federal government has proposed amendments to the Section-216 ITO to give commercial banks and privately-hired auditors access to the taxpayers' data. The amendment is part of the Tax Laws Amendment Bill that has been tabled in the National Assembly.
It emerged during the meeting that the current memorandum of understanding (MoU) signed between the provinces and the federal government on data sharing needed amendments. The MoUs were signed for sharing data of taxes collected on cars, property, stamp duty, sales tax, and agriculture income as part of the World Bank loan conditionality.
Even after 15 years of the 18th Constitutional Amendment, the Centre and the provinces have not yet agreed on a single definition of goods and services. Under the Constitution, the sales tax on goods is a federal subject, while the provinces have the right to sales tax on services.
The FBR chairman told the meeting that the basic issue in data sharing was a lack of consensus on the definition of goods and services in some areas. The FBR recommended that revision was needed in the MoUs for broader sharing of relevant data, and digitisation strategies.
The meeting decided that the MoUs between provincial and the federal authorities should be signed, with clear plans for expansion of the single portal across various sectors.
The NTC referred the matter of data sharing to its executive committee for further deliberation. The executive committee would assess the need for information sharing based on each tax provision, the category of income, the category of taxpayers etc, for the decisions, according to the decision.
Livestock tax dispute
The sources said that the Punjab government did not agree to exclude the livestock subject from the purview of its new agriculture income tax law, which was passed last month as part of the IMF condition.
Under the Constitution, the income from livestock is a federal subject. Only Punjab has included livestock in its agriculture tax law. The FBR chairman said that livestock was a federal subject and could not be included in agriculture income tax, said the sources.
The finance minister requested the Punjab government to exclude livestock from its law. However, the province contended that the law had already been passed by the provincial assembly. The NTC referred the matter to its executive committee to harmonise the provincial agriculture laws and with the income tax laws of the federal government.
The IMF has imposed a condition that by October 2024 the provincial agriculture income tax rates would be aligned with the federal personal and corporate income tax rates. Punjab passed the law but did not mention rates in the act, while the other three provinces are in violation of the IMF condition.
The meeting also reviewed the status of rationalisation of property valuation tables for the purpose of increasing tax collection. There was a consensus among the stakeholders that there should be a common framework for property taxation across provinces, particularly regarding valuation methods.
The meeting was informed that Punjab was considering a shift from rental to capital value for urban immovable property tax in line with the stamp duty and capital gains tax.
It was recommended to standardise the valuation methodology, digitise property records, and establish a system for regular updates to reduce compliance costs and ensure consistency in property tax assessments.
Minister of State for Finance Ali Pervaiz Malik underscored the need for revisiting the methodology used for property valuation tables. The executive committee was authorised to review the property tax issues and submit its recommendations to the NTC with regard to a common framework for assessment.