Bank loans, govt tenders bidding: Only tax-paying NTN holders to be allowed

User Rating: / 1
PoorBest 

Saturday, 28 January 2012 08:45

0 Comments

SOHAIL SARFRAZ

ISLAMABAD: The Federal Board of Revenue (FBR) would only allow purchase of vehicles, loans from banks, participation in the bidding process, supplies to government departments/ consultants, procurement in government departments and other activities to those National Tax Number (NTN) holders who show some tax activity duly recorded by the FBR.

Sources told Business Recorder here on Friday that the FBR has finalised the plan to check misuse of NTNs and improve compliance of NTN holders, who are neither showing any tax activity nor filing their income tax returns. The repeated use of NTN without showing tax activity would be effectively checked under the new plan. As per Income Tax Ordinance 2001, every NTN holder is required to file the income tax return. It has been observed by the FBR almost 50 percent of the NTN holders do not file their returns even after obtaining the NTNs. These persons have obtained the NTNs during the last many years, but are showing no business activity or compliance by filing of returns. In this way, a number of people use their NTNs in various activities such as purchase of car, participation in the bidding process against various tenders floated by government departments and registered companies, suppliers to government departments and consultants, processing of business visas (where required), obtaining loans from banks and etc. Because these categories of people are able to simply write down their NTNs and provide the copy of NTNs which fulfill the basic requirement of the NTN holder which is mostly required in the bidding process and supplies of various goods. The NTN holders not engaged in any kind of tax activity are to be declared as 'Dormant Taxpayers'.

Subsequently, the persons who would consistently show compliance will be considered as active or compliant taxpayers. The persons who would be non-active or dormant would be considered as unregistered with the tax department. The non-compliant persons would be treated as non-registered persons as per FBR's database, sources explained.

In order to improve the compliance level of NTN holders, FBR has decided to classify the 'NTN Master Index' into four broader categories--Active Taxpayers", "Non-Active Taxpayers", "Live Taxpayers" and "Dormant Taxpayers".

After introduction of the amendments in the tax laws, sources said,  the FBR will enter the category of best tax administrations where NTN holders and compliant taxpayers are recognised in the society as respectable personalities because only active taxpayers will be able to import, export, provider services and carry out other activities. The voluntary compliance is expected to be improved under the new plan.

Details show that the FBR has decided to define "Active Taxpayers", "Non-Active Taxpayers", "Live Taxpayers" and "Dormant Companies" to clearly differentiate between the compliant and non-compliant taxpayers for obtaining legal backing to identify non-filers or National Tax Number (NTN) holders, who have closed their businesses etc.

Under the 'NTN Master Index', the "Live Taxpayers" would cover such persons who have shown some kind of tax activity and recorded in the books of BFR. Within the database of "Live Taxpayers", the FBR would classify the "Active Taxpayers" or "Non-Active Taxpayers", depending on the activity of the person. Based on the data of the "Live Taxpayers", the classification of "Active Taxpayers" or "Non-Active Taxpayers" would be done by the FBR. As FBR would only monitor the "Live Taxpayers", the FBR can effectively do enforcement through limited Human Recourses for monitoring of the live taxpayers.

Sources stated that the FBR has decided to amend the Income Tax Rules 2002 to clearly define "Active Taxpayers", "Non-Active Taxpayers", "Live Taxpayers" and "Dormant Companies". There are a large number of persons, who have obtained the National Tax Numbers (NTNs) for local purchase of new vehicles or properties. In other cases, people have obtained the NTNs but they have closed their businesses or are not available on the declared addresses. There is a need for clear definition of "Dormant Companies" so that data of such closed companies should be deleted from the 'NTN Master Index'. Within the FBR's database, the Board has to specify the category of "Live Taxpayers" for constant upgrading of the database. The definitions of the said categories of persons would also be instrumental in the cleansing of the 'NTN Master Index'.

However, the criterion for treating any unit as "Dormant Company" would be mentioned in the amended Income Tax Rules. Similarly, the FBR will explain that how a company would be considered as "Live Taxpayer" under the 'NTN Master Index'. The persistent filers of returns or non-filers would be distinguished for placing them under the specified category of the 'NTN Master Index'. For example, if a person is persistent non-filer of return, he could be declared as "Non-Active Taxpayers".

The amended Income Tax Rules would also explain that how the "Non-Active Taxpayers" could be converted into "Active Taxpayers" or "Live Taxpayers". The difference between the "Active Taxpayers" or "Live Taxpayers" would also be explained in the amended Income Tax Rules, sources maintained.

According to sources, the purpose of the amendments in Income Tax Rules is to specify that which type of companies would be considered as "Active Taxpayers" or "Non-Active Taxpayers".