The government's plan to ban economic transactions by ineligible persons from the start of new fiscal year has faced a setback, as a National Assembly panel found the online portal being developed to determine the eligibility criteria for carrying economic transactions was far from the finishing line.
National Assembly Standing Committee on Finance Chairman Syed Naveed Qamar gave his critical post-review assessment on Friday after reviewing the government's much-trumpeted plan to catch tax evaders.
The committee, nonetheless, supported the government's proposal to impose income tax on the earnings of elite recreational clubs, like Islamabad Club and Guns and Country Club that charge more than Rs1 million membership fees.
Work on the online platform is far from the finishing line, said Naveed Qamar, a day after he and other committee members took a briefing of the new system in a visit to the Federal Board of Revenue headquarter.
The statement made by the chairman after reviewing the system shows that FBR has failed to develop a credible online system.
The government has proposed to ban economic transactions by those whose assets and wealth statements do not support buying a plot, a car, invest in securities or maintaining bank accounts.
The committee had linked the approval of the powers with the FBR's ability to develop a system that is free from the exploitation of the taxpayers. The FBR had earlier promised to develop this system by April this year.
The FBR's briefing showed that it was merely a prototype system that cannot be described fully functional and does not have the ability to achieve the intended purposes, said Usama Mela, the member of the standing committee and the PTI MNA.
In his post-budget press conference, Finance Minister Muhammad Aurangzeb had warned that if the Parliament did not approve the proposed amendments, the government may have to impose Rs400 billion to Rs500 billion in new tax measures. But his organization has not developed a trustworthy system.
There is still a chance that the National Assembly committee will approve these amendments but their enforcement will be linked with the development of a credible online platform.
The new system determining the eligibility criteria of taxpayers to undertake economic transactions would not be enforced from July 1st, the Chairman FBR Rashid Langrial told the standing committee. He further explained that the current system will continue until a new system is put in place.
The government has already proposed in the law that these new conditions will take effect after the approval of the federal government.
The chairman of the standing committee proposed that initially the FBR should apply the new system to a set of taxpayers instead of fully rolling it out. The chairman FBR agreed to the recommendation.
The government has proposed that only those people can buy cars, plots, invest in securities who have sufficient declared white legal resources to buy these assets and maintain bank accounts
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 new system was conceived by Rashid Langrial in order to collect due taxes from people, either filers or non-filers. An eligible person can make major purchases of up to 130% of the value of cash and assets, declared in his last tax return and the wealth statement or he can justify any new source.
Recreational Clubs
The FBR informed the standing committee about an amendment in the law to capture the incomes of the elite clubs, which are exempted from paying income tax. The government has proposed to exclude these recreational clubs charging over Rs1 million for the membership fee from the purview of the non-profitable organizations.
The Islamabad Club is very much coming in the tax net, said Muhammad Aurangzeb.
The club had been built as a recreational facility for the bureaucrats and diplomats. Over the years, its fee was exorbitantly increased to many millions of rupees. Its membership is being offered to only the richest or the influential people, denying others from availing facilities being built on the state land.
The standing committee also rejected a government budget proposal of indirectly charging income tax from the farmers despite their income cannot be taxed by the federal government.
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