ISLAMABAD: Those involved in tax fraud and default under the new Reformed General Sales Tax (RGST) regime will be put on trial and awarded a jail sentence of up to five years by special judges in addition to a cash penalty of Rs500,000, or one hundred per cent of the amount of tax involved – whichever is higher.
According to a 62-page bill set to be tabled in the Parliament to introduce broad-based tax on sales and purchase of goods across Pakistan, the federal cabinet has agreed to give powers to the Federal Board of Revenue (FBR) – which will be able to appoint special judges empowered to punish everyone found guilty of breaching the new tax act after it is enacted.
The FBR can appoint as many judges as it deems necessary, but they must be a sessions judge.
According to a copy of this bill obtained by The Express Tribune, which was approved by the cabinet on Wednesday, an officer of inland revenue not below the rank of an assistant commissioner after prior permission from a special judge, may arrest for prosecution any person believed to have committed tax fraud or offences liable to be prosecuted in accordance with provisions of the criminal procedure code.
According to the penalties proposed in the new act, were a company believed to have committed tax fraud, every director or officer of such company suspected or believed to have been personally responsible for the commission of such tax fraud, may be arrested and such arrests shall not absolve the company from any tax liability or other obligations under this act.
The bill reads that anyone found involved in committing – or causing to commit, or attempting to commit, or even abetting – tax fraud will be liable for a fine and/or imprisonment upon conviction by a special judge.
The minimum penalty on failure to obtain registration or noncompliance of compulsory registration has been proposed at Rs100,000. Late filing or non-filing will be punishable with Rs5,000 provided that if a return is not filed within 15 days of the due date, a penalty of Rs100,000 for each day of default shall be paid.
Failure to issue tax invoice will be punishable with Rs5,000 or three per cent of the amount of tax involved. Failure to notify a change of address or increase in business capacity of material nature in the particulars of registration would be punishable with Rs50,000.
Failure to deposit the tax will be punishable with Rs10,000 or five per cent of the tax involved. Ten thousand rupees is the fine for non-maintenance or defective maintenance of record.
The bill also says that failure to furnish any information required under this act will be punishable with Rs10,000. Any person who submits a false or forged document to the board or makes a false statement will be punishable with Rs25,000 or one hundred per cent of the amount tax involved and may also be convicted in jail.
Anyone who denies or obstructs the access of any officer of inland revenue to the business premises or registered office, will be fined Rs25,000 or 100 per cent of the amount of tax involved and a conviction. Anyone obstructing an officer of inland revenue in the performance of his official duty is also liable to the same action.
Failure to fulfill any of the conditions, limitations or restrictions specified or prescribed in a notification issued under any provision of this act will be punished with Rs5,000 or three per cent of the amount of tax involved, whichever is higher.
Whosoever submits fake documents to claim tax refund will be fined Rs50,000 and five years jail.
Failure to withhold tax as required under any provision of this act will be punished with Rs10,000 or three per cent of the tax, whichever is higher. Repetition of an offence for which a penalty is provided under this act shall be twice the amount of the initial penalty.
Any person who repeats erroneous calculation in the return whereby the amount of the tax is less than the actual due amount of the tax will be fined Rs5,000 or three per cent of the amount of tax involved, whichever is higher. Any person who fails to make payment in the manner prescribed under this act shall be fined with Rs5,000.
Punishments have also been proposed for the officers authorised to act under this act.
Any act that causes a loss in sales tax revenue or otherwise abets such an act, shall be liable to conviction by a special judge for three years in jail or with a fine which may be equal to the amount of the tax involved.
A one-year jail term has also been proposed for persons who gain access to or attempts to gain access to the computerised system.
Published in The Express Tribune, November 11th, 2010.