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KARACHI: Karachi Tax Bar Association (KTBA) has proposed to the Federal Board of Revenue (FBR) to separate tax fraud investigations from normal audit and assessment function in order to give confidence to the law-abiding registered people.

In its federal budget 2021 proposal sent to the finance minister and chairman FBR, the KTBA strongly urged to establish special directorate to conduct the forensic audit of cases involving tax fraud and if the tax officer of the concerned has determined that the registered person is involved in tax fraud the case be turned over to the special directorate to carry out further investigation in line with criminal proceeding under other laws.

The bar is of the view that this differentiation between the law-abiding registered people and those who are engaged in criminal activities will restore confidence in the genuine taxpayers and will create deterrence against tax evasion.

It is also proposed that a new subsection be inserted in the aforesaid section prescribing time limit of one year to conclude such audit proceeding in line with the directions of the Supreme Court of Pakistan and time limitation in all situations should be extended up to 365 days and the time limit for condonation by the officers inland revenue should be extended up to 700 days as there is no loss of revenue involved.

It also urged that a simple and unambiguous procedure may be notified for adjustment of sales tax refund with the income tax liabilities and vice-versa in order to alleviate the unnecessary cash flow problems faced by the registered persons.

The KTBA in its budget proposal advocated the reintroduction of tax credit, saying that tax credit on 90% sales should be extended to persons making 90% of purchases from persons registered under the Act, which would encourage the much-desired documentation of the economy.

It further recommended to reduce the corporate rate of tax up to 25% by gradually decreasing 1% every year and the rate of tax on small companies should also gradually be reduced to 15% because the high rate of tax is encouraging tax evasion and discouraging documentation of economy and corporatization besides discouraging foreign and local investments.

It is also proposed to abolish minimum tax on listed companies and in other cases, the rate of minimum tax should be gradually reduced by 0.2% annually so that by tax year 2025 the rate shall be reduced up to 0.5% and increase the threshold of turnover to 50 million. In addition, the minimum tax should also be allowed to be carried forward for adjustment in subsequent years even in case of losses.

The KTBA also suggested introducing a separate scheme for individuals, AOPs and the rate of tax across the board should be reduced to 3% and added that a uniform rate of tax should be applied instead of providing exemption or reduced rate and the export of services should be included in section 154 of the Ordinance.

It is recommended that NPOs should be categorized according to their nature, objectives and purposes and not a single standardized rule should be made applicable. The said condition be deleted or a clarification should be issued whereby certain nature of NPOs are excluded from this condition.

The KTBA in its budget proposal suggested to the board to issue a separate list of Fee Tax Numbers (FTNs), who are not liable to tax withholding as provided under Section 49(3) of the Ordinance through an SRO and added that no credit for

tax payment can be availed either by the withholder or by the recipient of the amount and the withholder should be allowed to deposit the tax in the name of the parties whose withholding fell short.

Copyright Business Recorder, 2021