The government should offer all compliant/regular taxpayers to disclose income/sales/assets in future at the rates offered to owners of undisclosed assets under the Assets Declaration Ordinance, 2019 to avoid discrimination and honour the contributions made by regular/compliant taxpayers.
Speaking as a guest in "Paisa Bolta Hai" of Aaj News with Anjum Ibrahim here on Sunday, tax lawyer Waheed Shahzad Butt said that the compliant taxpayers paying due amount of taxes regularly should also be given opportunity to pay their taxes at reduced rates which is time and again offered to tax evaders under the umbrella of "amnesty". To avoid discriminatory treatment, time has come that all taxpayers be allowed to pay their due taxes without any fail and FBR policies need to be revamped.
The efforts of the FBR's field formation Directorate General of Intelligence and Investigation-Inland Revenue (I&I)-IR and field formations, ie. regional tax offices to detect undisclosed assets, income and sales have been totally ignored by introducing the amnesty scheme, he said.
Former FBR Member Inland Revenue Policy Dr Muhammad Iqbal said that Federal Board of Revenue (FBR) has witnessed massive revenue shortfall of more than Rs 400 billion during the July-April 2018-19. The FBR has under-stated revenue shortfall by stating shortfall of Rs 350 billion during July-April 2019-20. The revenue shortfall has been estimated to cross Rs 500 billion by the end of current fiscal year, he warned.
About the withdrawal of exemptions, Dr Iqbal said the FBR will not withdraw exemptions granted to socially sensitive items and available under sovereign and international agreements. The scope of withdrawal of exemptions is not very much, as most of the exemptions have already been withdrawn during the last few years.
Dr Iqbal added that after announcement of the last amnesty scheme, it is too early to launch again another scheme within one year period. During last amnesty scheme, the FBR generated around Rs 125 billion. However, the FBR may not be able to reach this amount under the new Assets Declaration Ordinance, 2019, he said.
To a question, Waheed said that the existing tax system needs to be analysed to ascertain the reasons why the taxation system is not effectively working in Pakistan, adding there is large scale under-reporting, non-disclosure and concealment.
Waheed Shahzad Butt has also challenged the scheme in the Lahore High Court with the argument that there is another financial "National Reconciliation Ordinance" under the umbrella of 'Assets Declaration Ordinance, 2019' recently promulgated by the President through an ordinance in terms of Article 89 of the Constitution.
The tax lawyer added that introducing Amnesty Scheme for tax dodgers is simply nothing but one step forward and two steps back. It is another clean chit to break the net for the untaxed and under-taxed businesses/persons/taxpayers and severe violation of Constitution. Assets not declared have ultimately been created out of undisclosed income never offered to tax to the Revenue Divisions.
Waheed further added that intention behind the instant amnesty scheme is not to collect tax because time line to pay tax on undisclosed assets has been extended up to June 30, 2020, meaning thereby, anyone involved in tax evasion and created huge wealth/assets, if interested to avail scheme, is simply required to hand over/file a piece of paper to the FBR with the promise to pay the tax in next year.
He said that the highest income tax rate for the tax year 2018 has been fixed by the Parliament through legislation at 35 percent and in case there is element of concealment of income or assets created out of undisclosed income, the FBR is authorised to impose penalty at the rate of 100 percent of amount of tax evaded. Thus, a tax dodger is liable to pay tax on its concealed income/asset at the rate of 70 percent but nominal rates of taxes have been offered to tax evaders under the new scheme, ie, 1.5 percent, 2 percent and 4 percent.
He said that under the Sale Tax Act, 1990, a regular registered taxpayer is obliged to charge 17 percent sales tax and in case sales have been made to unregistered persons, further 3 percent sales tax is also charged. Thus, 20 percent gross rate is applicable to a person registered with FBR. In case there is element of concealment of sales then FBR is legally empowered to impose 100 percent penalty. Under the amnesty scheme, sales can be legalised at the rate of 2 percent which is unjustified, as the rate is even less that the rate applicable to unregistered buyers.
The tax lawyer added that tax liability of a person can only be determined/altered/re-determined by the Parliament. The interpretation of law is the sole prerogative of the courts with the Supreme Court having the final say in the matter. Instant amnesty scheme is in violation of fundamental rights of equal treatment under Article 25 of the Constitution, he said.
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