Just a day after the government constituted a committee to resolve the dispute over the 8% minimum tax on the services industry, Transparency International Pakistan (TIP) has approached the Prime Minister’s Office, seeking its dissolution on grounds that majority of its members had tainted reputations.
In the letter, the TIP has claimed that the Tax Review Committee may harm national interests instead of protecting them.
It alleged that corrupt elements in the Federal Board of Revenue (FBR), in connivance with abettors of some telecom companies, may cause an annual loss of around Rs30 billion to the exchequer.
“The prime minister is requested to kindly take immediate action against those responsible for such an illegal act to defraud the national exchequer and immediately dissolve the void committee that has a pre-planned agenda to defeat the parliament and serve the interest of their clients at the cost of the public exchequer,” said the letter.
It has also demanded that the corrupt government officials involved in this illegal move should also be taken to task under the National Accountability Ordinance of 1999.
The complaint has also been forwarded to NAB chairman, the Supreme Court of Pakistan registrar, Federal Tax Ombudsman and the Prime Minister’s Inspection Commission chairman.
Finance Minister Ishaq Dar had constituted the five-member committee to suggest amendments in the Income Tax Ordinance’s section 153, that deals with minimum tax on all the service providers.
Through the Finance Act 2015, the government had imposed 8% minimum tax on service providers’ revenue , irrespective of their profit. Service providers termed the levy a “draconian law”.
According to the letter, TIP, on 11 June 2015, had appealed to Prime Minister Nawaz Sharif to stop an illegal move of the FBR, which the TIP claimed would cause billions of rupees losses to the exchequer.
On June 5, the FBR proposed an amendment into Section 153(1)(b) of the Income Tax Ordinance aimed at allowing the telecom companies to claim tax refunds from 2009, on the levy of ‘Minimum Tax’ under Section 153(1)(b) of the Income Tax Ordinance 2001 at 6% of gross receipts on all service providers (corporate and non-corporate).
On the same date, the FBR had also proposed to make this minimum tax adjustable with effect from 2009 that would have allowed the telecom companies to claim billions of rupees in backdated refunds.
However, the FBR later on withdrew this amendment and proposed another one, which was approved by the Parliament during the last week of June.
Special Assistant to the PM Haroon Akhtar would head the five-member committee that would comprise Asim Zulfiqar, Ashfaq Tola, Naveed Andrabi and a senior member from the FBR Shahid Hussain Asad.
The TIP claimed that the committee members had a conflict of interest. It said Naveed Andrabi has filed a petition in the Lahore High Court (LHC) on behalf of his client who is/are service providers, against the 8% minimum tax.
However, after the committee’s notification, Andrabi in writing informed the FBR that he would not become a member due to conflict of interest. This has highlighted the usual inefficiency of the FBR that did not do its homework before proposing names of the members to Finance Minister Ishaq Dar.
The TIP also raised questions on Asim Zulfiqar, a chartered accountant of AF Ferguson & Co, which are the auditors of many cellular companies.
“Almost all the cellular companies are running into losses since their establishment; they show losses in their income tax returns and have never paid any income tax or nominal income tax,” said the TIP in the letter.
The TIP further claimed that the telecom companies always influenced the decision making of the FBR through their tax consultants and planted officers in FBR.
It said earlier, a cellular company, which was represented by Asim Zulfiqar, used its connection to manage a circular 06 of 2009 through an FBR official, Khalid Aziz Banth.
The Income Tax Policy Chief Aftab Ahmad stated that he signed the FBR circular on 18-8-2009 under pressure from Member Direct Taxes Khalid Aziz Banth.
Published in The Express Tribune, September 6th, 2015.
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