FBR asks UN to provide data: officials, permanent residents liable to pay taxes

The Federal Board of Revenue (FBR) has asked the United Nations to provide lists of all experts, consultants, service providers, salaried individuals, Pakistani nationals and permanent residents to whom the UN and its various agencies and subordinate offices are making payments in Pakistan, to register these persons with the tax department and collect all admissible taxes from them.
Sources told Business Recorder here on Sunday that the FBR has now sought the United Nation''s cooperation in prevention of abuse of diplomatic/consular privileges, immunities and facilities in Pakistan. The FBR will also document and collect income tax from all individuals to whom payments are made for various buildings/premises hired by United Nations in Pakistan. The FBR has informed the UN that the United Nations (Privileges and Immunities) Act 1948 does not grant any exemption from taxation to experts, and such experts/consultants are liable to pay taxes on their salaries, emoluments and other payments received from the United Nations. The income of Pakistani nationals serving with the United Nations or diplomatic missions will be liable to taxation unless specifically exempted by the Government of Pakistan. The rent paid to Pakistani nationals and permanent residents for various premises hired by the United Nation mission and its various agencies and subordinate offices do not enjoy immunity from taxation, the FBR added.
In a communication to the United Nation''s Children Fund, Islamabad, Directorate General Intelligence and Investigation Inland Revenue FBR has asked the UN to provide necessary information to ensure that the immunity and exemptions available to the United Nations are duly respected, and to check any abuse of these immunities and exemptions by those to whom they are not been extended by the laws. The UN should provide lists of the officials who are enjoying immunities and exemptions from taxation under the relevant laws. The UN should also provide list of all experts (as specified in Section 22 of the Act of 1948), Pakistani nationals and permanent residents to whom the United Nations and its various agencies and subordinate offices are making payments in Pakistan under various heads on the following format.
The format includes name and address of the individual, national identity card number, post held (or nature of contract if on contract), date of appointment/contract, duration of the appointment/contract and payment made by the United Nations during the period July 1, 2010 to June 30, 2011. The UN will also provide list of all individuals to whom payments are made for the various buildings/premises hired by United Nations in Pakistan on the laid down format. The information to include name and address of the property owner, national identity card number, address of the property hired and date from which the property was hired.
The FBR has further informed the UN that the instant correspondence requests for UN''s attention towards the FBR''s resolve of collecting due taxes from all individuals in accordance with rules, procedures and quantum laid down by the laws. But before that, on behalf of the FBR, tax authorities would like to express gratitude to the United Nations Mission in Pakistan and its various offices and agencies for their efforts in the country towards social uplift and providing timely help to those in need.
Apart from collecting revenues for government functioning, one of the key functions of the modern taxation authorities is their contribution towards the establishment of fair social justice system in the society, particularly in the sphere of economic activity. This end is achieved by spreading the burden of taxation equitably across various sectors and individuals and the principle is commonly known as taxing each individual in accordance with her/his capacity. A broad and diverse tax base is, therefore, inevitable for a just and fair social setup where all individuals contribute towards the national exchequer in accordance with their due share determined by the laws. Unfortunately, the tax base in Pakistan is one of the narrowest, even compared to other countries in the region. This narrow tax base is seriously hampering the prospects of a fair economic and social justice system in the country, the FBR stated.
With this in mind, the FBR had created this Directorate General of Intelligence & Investigation Inland Revenue with broadening of tax base as one of the core functions. This Directorate General requests for UN''s assistance in making the FBR''s drive for a fair and just economic and social justice system a reality.
This assistance is requested in the spirit of the provisions of United Nations (Privileges and Immunities) Act 1948, more specifically the following:
Section 21: The United Nations shall co-operate at all times with the appropriate authorities of Members to facilitate the proper administration of justice, secure the observance of police regulations and prevent the occurrence of any abuse in connection with the privileges, immunities and facilities mentioned in this Article.
The FBR said that the section 42 of the Income Tax Ordinance, 2001 (copy enclosed) provides exemption to the individuals entitled to privileges under the Diplomatic and Consular Privileges Act 1972 (IX of 1972) to the extent specified in the United Nations (Privileges and Immunities) Act 1948 (Act of 1948 hereinafter).
The extent of exemptions specified in the Act of 1948 supra is the following:
As per section 7, the assets, income and other property of the United Nation shall be exempt from all direct taxes, provided that the said exemption shall not exceed the charges for public utility services.
As per section 18, officials of the United Nations (as mentioned in section 17 of the Act) shall enjoy exemption from taxation on the salaries and emoluments paid to them by the United Nations.
Section 17 provides that the names of such officials shall, from time to time, be made known to the Governments of the Members, FBR said.
It is important to note that the Act of 1948, does not grant any exemption from taxation to Experts (as specified in section 22 of the Act of 1948), and hence they are liable to pay taxes on their salaries, emoluments and other payments received from the United Nations.
Further guideline on the taxability of the payments made by the United Nations could be obtained from the Diplomatic and Consular Privileges Act 1972 (IX of 1972) (Act of 1972 hereinafter), the most pertinent of which are mentioned below:
Firstly, the Article 23(2) of the Act of 1972 lays down that whereas the Head of the mission shall be exempt from all national, regional or municipal dues and taxes in respect of the premises of the mission, no such exemption shall be available to the persons contracting with the sending State or the head of the mission.
Secondly, the Article 34 of the Act of 1972, while extending immunity to diplomatic agents, places the dues and taxes on their private income having source in the receiving State outside the scope of this immunity.
Thirdly, the Article 49(3) of the Act of 1972 stipulates that the Members of the consular post who employ persons whose wages or salaries are not exempt from income tax in the receiving State shall observe the obligations which the laws and regulations of that State impose upon employers concerning the levying of income tax.
The FBR has further informed the UN that the Article 71 of the Act of 1972 specifies that those members of the consular posts and their family members who are national or permanent residents of the receiving State, shall enjoy exemption only to the extent to which these are granted by the receiving State. This means that the income of the Pakistani nationals serving with the United Nations or diplomatic missions will be liable to taxation unless specifically exempted by the Government of Pakistan.
The FBR said that mention of the aforesaid provisions of laws has been made to demarcate the contours of the exemptions available to the various payments made by the United Nations to various individuals in Pakistan under different heads such as salaries, full or part-time service contracts, fees for services and rents for the premises hired. With regard to the taxability of income derived from the United Nations, the above provisions could be boiled down to the following general principles:
One, the income derived from the United Nations and its various agencies and offices in Pakistan is exempt from taxation in so far it is received by the members of the mission and their families.
Two, the experts, nationals and permanent residents of Pakistan are outside the scope of this exemption unless specifically exempted by the Government of Pakistan.
Three, the rent paid to Pakistani nationals and permanent residents for the various premises hired by the United Nation mission and its various agencies and subordinate offices does not enjoy immunity from taxation.
In accordance with these principles, payments made by the United Nations and its various agencies and subordinate offices to Pakistani nationals, and all such persons who are not covered u/s 17 of the Act of 1948 (as referred above), are liable to taxation. To meet the ends of just taxation for ushering in a fair social justice system, all such payments need to be subjected to taxation in accordance with the rules, procedures and quantum contained in the law.
Towards this end, this Directorate General solicits your cooperation in providing the specified information to this Directorate General to ensure that (1) the immunity and exemptions available to the United Nations are duly respected, and (2) to check any abuse of these immunities and exemptions by those to whom they are not been extended by the laws. The information included the list of the officials as specified in section 17 of the Act 1948 so that respect for their immunities and exemptions from taxation is ensured. List of all the Experts (as specified in Section 22 of the Act of 1948), Pakistani nationals and permanent residents to whom the United Nations and its various agencies and subordinate offices are making payments in Pakistan under various heads. The UN should also provide list of all the individuals to whom payments are made for the various building/premises hired by United Nations in Pakistan, FBR added.
The FBR has further conveyed to the UN that the section 42 of the Income Tax Ordinance, 2001 deals with the ''Diplomatic and United Nations exemptions''. The section said that the income of an individual entitled to privileges under the Diplomatic and Consular Privileges Act, 1972 (IX of 1972) shall be exempt from tax under this Ordinance to the extent provided for in that Act. The income of an individual entitled to privileges under the United Nations (Privileges and Immunities) Act, 1948 (XX of 1948), shall be exempt from tax under this Ordinance to the extent provided for in that Act. Any pension received by a person, being a citizen of Pakistan, by virtue of the person''s former employment in the United Nations or its specialised agencies (including the International Court of Justice) provided the person''s salary from such employment was exempt under this Ordinance, section 42 of the Income Tax Ordinance, 2001.