Senate panel endorses Tax Laws Amendment Act
A Senate panel on Thursday endorsed a proposed legislation that would lead to the closure of all bank accounts of non-filers having bank balances of over Rs1 million and would even bind filers to first explain the source for buying a home or a car.
The Senate Standing Committee on Finance unanimously backed the Tax Laws Amendment Act 2024 with certain amendments to make the law more stringent. The bill will now be placed before the National Assembly for voting. Senator Saleem Mandviwalla of PPP chaired the meeting, which was attended by members of the PML-N and PTI.
The proposed law introduces a new legal concept of eligible and ineligible persons and even a filer can be ineligible to buy a home, car, or shares and have a bank account.
Only the eligible people will undertake transactions related to purchases of property, cars and shares that too up to 130% of the value of assets declared in their previous tax returns.
Only the eligible people will have the right to operate and own a bank account having value of more than Rs1 million. The ineligible persons will not be allowed to withdraw cash from their bank accounts, beyond a certain limit, according to the proposal. People will have to justify the source before buying any asset, said Finance Minister Muhammad Aurangzeb while explaining the restrictions on the filers. Federal Board of Revenue (FBR) Chairman Rashid Langrial admitted that the existing law of conducting a post audit after some purchase has not helped due to the FBR's weak capacity.
"The government is pushing people to go somewhere else," said Senator Shahzaib Durrani. PML-N Senator Anusha Rahman recommended that the government should also restrict the purchase of gold by ineligible persons and the condition of explaining the source of asset should also be applicable to the seller of property.
According to new Section 114C, an ineligible person cannot book, purchase or register a car of over 800cc. However, the ineligible person can buy a rickshaw, motorcycle rickshaw, tractor, pick-up vehicle having 800cc capacities, trucks and buses.
The ineligible persons, which the FBR will notify, cannot open or maintain an already opened bank account, except an Asaan account. They will not be allowed to withdraw cash beyond a certain limit that the FBR will determine. The finance minister disclosed that during a meeting held on Thursday it was said that the proposed legal changes may completely shut down the real estate market.
He was referring to a meeting of the prime minister's new task force on the development of housing sector. The task force's terms of reference (ToR) include reviewing the impact of current taxes on the real estate sector and proposing an equitable and enabling taxation regime. There is also a ToR on reducing costs by rationalising taxes on construction inputs.
Senator Anusha Rahman recommended that restrictions should also be placed on Defence Housing Authority (DHA) transactions where the property was not transferred in the name of buyer.
The FBR chairman said that restrictions would be applicable to the DHA business too. Langrial added that although in DHA the property was not transferred in the name of buyer, the right to live was transferred to the buyer and at that point the FBR would check eligibility. He said that after enactment of the new law, all bank accounts of ineligible persons, except the Asaan account having a Rs1 million cap, would have to be closed down.
He said that people would be asked to either become eligible filers or convert their existing account to an Asaan account. The chairman added that the SBP would have complete details of all the bank accounts of a person in the next two to three months and after that, this condition would be implemented.
The government has also proposed to seek powers to share taxpayers' data with commercial banks, which will then provide names and account numbers of such persons where the banking information is at variance with data algorithms.