NA panel reviews FBR powers

The National Assembly Standing Committee on Finance on Thursday directed the Federal Board of Revenue (FBR) to incorporate safeguards before closing bank accounts of unregistered businesses, amid widespread tax evasion and underreporting by businesspeople.

The committee, which met here with its chairman Syed Naveed Qamar in the chair, reviewed the FBR's proposed measures to enforce sales tax compliance, including the disconnection of utilities and temporary freezing of bank accounts for non-filers.

During the meeting, FBR Chairman Rashid Mahmood Langrial gave a briefing to the committee. He said that unregistered businessmen would not be able to operate a bank account under sales tax laws, adding that such a person would be served a notice prior to the closure of the bank account.

"The bank account of an unregistered person will be reactivated within two days after registration," he said. He revealed that out of 300,000 industrial units in Pakistan, only 30,000 to 35,000 were registered with the authorities. Explaining reasons, he acknowledged that the tax rate in Pakistan was high.

"One-third of manufacturers are not registered in sales tax. People who even come under the tax net do not file returns," Langrial said. "Those who pay taxes underreport their incomes," he told the committee. "Electricity theft alone costs Rs500 to 600 billion every year."

When asked how the FBR would identify businesses not paying sales tax, the FBR chairman explained that the income declared for income tax purposes would be used to estimate the volume of sales, supplies and overall business activity.

Action would then be taken against individuals who fail to register, he added.

Committee member Javed Hanif supported the FBR's proposals but the committee chair cautioned against enacting a law aimed at catching tax evaders if it also adversely affects compliant businesses.

Another Committee member, Sharmila Farooqi, suggested that instead of making the penalties more stringent, the taxpayers should be given incentives. "Reduce the tax rate. It will broaden the tax net and encourage the people to get them registered.

Finance Minister Muhammad Aurangzeb replied that the tax threshold and process would be improved. however, he made it clear that tax exemptions and amnesties would not be given anymore. "The time for tax exemptions and amnesties has passed. People have to be brought into the tax net."

Langrial urged the committee to allow the FBR to temporarily deactivate the bank account of unregistered businessmen. The committee, however, directed for including safeguards in the process.

Petroleum levy

Meanwhile, the committee approved a proposal to increase the rate of petroleum development levy (PDL) to Rs90 and impose carbon levy on petrol, diesel and furnace oil. Finance Ministry officials told the committee that there was a proposal to impose the PDL on furnace oil as well.

The officials said Rs100 billion in revenue was expected from the PDL on furnace oil. They added that 1.2 million tons of furnace oil was imported for 1,000MW Independent Power Producers (IPPs). The Power Ministry secretary said that the target of PDL recovery in fiscal 2025-26 was set at Rs1,468 billion.

The Finance Ministry officials said that the government expected Rs45 billion in revenue through the carbon levy. The committee chair asked how much amount the Centre would get if the levy was turned into a carbon tax. On that the officials said that the amount in that case would be Rs18 billion.

The committee was informed that the entire amount of a levy went to the federal government, but in taxes, provinces also get share. The chair stressed that the committee was not taking any decision regarding a levy or a tax on petroleum products.

The industries secretary told the committee that Rs10 billion from carbon levy would be spent of the promotion of electric vehicles. He added that 30% of the vehicles would be shifted to electric vehicles by 2030.

The production of all types of vehicles in the country is around 150,000, the officials said, adding that there were 76,000 electric vehicles in the country at present. "In the next five years, the production of electric vehicles will be increased to 2.2 million," the secretary said.