Finance Bill 2013: Tax on moveable assets being imposed retrospectively
Experts raise questions over definition of moveable assets.
"Although the FBR has confirmed the definition of ‘net moveable assets,’ the definition of ‘moveable’ is still ambiguous," Partner at Badami Law Associates Komail Badami PHOTO: FILE
KARACHI:
Near the end of the 65-page Finance Bill 2013, presented before parliament on June 12, is buried a chapter that is inconspicuously titled “Income Support Levy Act 2013,” a tax to be charged at the rate of 0.5% on net moveable assets in excess of Rs1 million.
Net moveable wealth means the amount by which the aggregate value of the moveable assets belonging to a person, as declared in the wealth statement for a tax year, is in excess of the aggregate value of all the liabilities owed by that person on the closing date of the tax year.
If the fact that it is called an ‘Act’ and has already ‘come into force at once’ despite being part of the Finance Bill 2013 was not surprising enough, its full title seems to suggest that it is going to be imposed retrospectively. In fact, Section 3 of this Act explicitly states that the levy will be applicable from tax year 2013 and onward.
Thus, the question arises: how can a proposed amendment, that would probably become part of the Act only upon the passage of the Finance Bill 2013, be applicable for approximately 355 days of a year that has already passed?
“The Finance Bill 2013 itself is still a proposal, and not an Act. Therefore, the applicability of the bill is still questionable,” said Komail Abbas Badami, who serves as partner at Badami Law Associates, a Karachi-based tax advisory firm, while speaking to The Express Tribune.
In the likely case of the bill’s passage, he noted, the changes introduced in the Act should ideally be prospective in nature. However, in such a case, the Income Support Levy Act 2013 should instead be named Income Support Levy Act 2014, in order to make it applicable from tax year 2014 and onward, Badami says.
Nevertheless, concerns that taxation experts are raising with regard to the Income Support Levy Act 2013 are not just limited to its retrospective applicability from tax year 2013. Questions such as whether net movable assets are to include foreign currency bank accounts, motor vehicles and fixed deposits that are not allowed to be moved remain unanswered, Badami says.
“Although the Federal Board of Revenue (FBR) has confirmed the definition of ‘net moveable assets,’ the definition of ‘moveable’ is still ambiguous,” he adds.
Wealth statement
As per Finance Act 2012 (hence applicable for tax year 2013), every resident taxpayer whose last declared or assessed income for the year is Rs1 million or more must furnish wealth and wealth reconciliation statements.
However, the recently-tabled Finance Bill 2013 proposes that every individual taxpayer filing a return of income will now be required to file a wealth statement, along with a wealth reconciliation statement for the year, irrespective of his or her declared or last assessed income.
Apparently, this is being done in order to ascertain the tax payable under Income Support Levy 2013 at the rate of 0.5% on a person’s net moveable assets in excess of Rs1 million.
“So how would the FBR determine the cases where taxpayers are not required to file a wealth statement as per provisions of Finance Act 2012?” Badami asks, adding the proposed change being introduced through Finance Bill 2013 should ideally be applicable from tax year 2014.
“The FBR’s attempts to make the submission of a wealth statement compulsory from tax year 2013 in order to ascertain the tax payable under the newly-imposed levy cannot be allowed in the eyes of law,” he adds.
Published in The Express Tribune, June 22nd, 2013.
Near the end of the 65-page Finance Bill 2013, presented before parliament on June 12, is buried a chapter that is inconspicuously titled “Income Support Levy Act 2013,” a tax to be charged at the rate of 0.5% on net moveable assets in excess of Rs1 million.
Net moveable wealth means the amount by which the aggregate value of the moveable assets belonging to a person, as declared in the wealth statement for a tax year, is in excess of the aggregate value of all the liabilities owed by that person on the closing date of the tax year.
If the fact that it is called an ‘Act’ and has already ‘come into force at once’ despite being part of the Finance Bill 2013 was not surprising enough, its full title seems to suggest that it is going to be imposed retrospectively. In fact, Section 3 of this Act explicitly states that the levy will be applicable from tax year 2013 and onward.
Thus, the question arises: how can a proposed amendment, that would probably become part of the Act only upon the passage of the Finance Bill 2013, be applicable for approximately 355 days of a year that has already passed?
“The Finance Bill 2013 itself is still a proposal, and not an Act. Therefore, the applicability of the bill is still questionable,” said Komail Abbas Badami, who serves as partner at Badami Law Associates, a Karachi-based tax advisory firm, while speaking to The Express Tribune.
In the likely case of the bill’s passage, he noted, the changes introduced in the Act should ideally be prospective in nature. However, in such a case, the Income Support Levy Act 2013 should instead be named Income Support Levy Act 2014, in order to make it applicable from tax year 2014 and onward, Badami says.
Nevertheless, concerns that taxation experts are raising with regard to the Income Support Levy Act 2013 are not just limited to its retrospective applicability from tax year 2013. Questions such as whether net movable assets are to include foreign currency bank accounts, motor vehicles and fixed deposits that are not allowed to be moved remain unanswered, Badami says.
“Although the Federal Board of Revenue (FBR) has confirmed the definition of ‘net moveable assets,’ the definition of ‘moveable’ is still ambiguous,” he adds.
Wealth statement
As per Finance Act 2012 (hence applicable for tax year 2013), every resident taxpayer whose last declared or assessed income for the year is Rs1 million or more must furnish wealth and wealth reconciliation statements.
However, the recently-tabled Finance Bill 2013 proposes that every individual taxpayer filing a return of income will now be required to file a wealth statement, along with a wealth reconciliation statement for the year, irrespective of his or her declared or last assessed income.
Apparently, this is being done in order to ascertain the tax payable under Income Support Levy 2013 at the rate of 0.5% on a person’s net moveable assets in excess of Rs1 million.
“So how would the FBR determine the cases where taxpayers are not required to file a wealth statement as per provisions of Finance Act 2012?” Badami asks, adding the proposed change being introduced through Finance Bill 2013 should ideally be applicable from tax year 2014.
“The FBR’s attempts to make the submission of a wealth statement compulsory from tax year 2013 in order to ascertain the tax payable under the newly-imposed levy cannot be allowed in the eyes of law,” he adds.
Published in The Express Tribune, June 22nd, 2013.