SUNDAY SEPTEMBER 11: Poor drafting of flood surcharge law creates confusion

ISLAMABAD: The poor drafting of the Income Tax (Amendment) Ordinance, 2011 on flood surcharge has forced the Federal Board of Revenue (FBR) to introduce key changes in the relevant annex/page of the income tax return for tax year 2011 to collect flood surcharge on payments made during March 15 to June 30, 2011.
Sources told Business Recorder here on Saturday that the FBR has decided to redraft the relevant page of the income tax return pertaining to surcharge to remove confusion among the business and trade. The surcharge would be payment-related during the period of March 15 to June 30, 2011. Now the surcharge would not be calculated on the filing of income tax return for the whole tax year of 2011 for deduction during March 15 to June 30, 2011. The surcharge would now only be applicable on payments made during March 15 to June 30, 2011.
The whole issue was confused due to complicated drafting of the Income Tax (Amendment) Ordinance, 2011 which resulted in confusion among the taxpayers for payment of income tax surcharge. A major change in the income tax return form is to re-draft the relevant annex so that the income tax surcharge would only be paid on the payments made during the period of March 15 to June 30, 2011.
If somebody has not paid surcharge on payments during this period, the amount could be recovered through audit. During the tax year 2011, any payment made during March 15-June 30 2011 has been subjected to surcharge. Whether such payment has been made on imports, withholding tax, exports and salaried deductions or any other payments made during this period, would be subjected to surcharge.
Sources said that the payments made during March 15 to June 30 shall now be subjected to surcharge and same would be collected accordingly. This means that surcharge would not be collected on the full year income as reflected from the ambiguous language of Income Tax (Amendment) Ordinance, 2011.
The drafting of the Income Tax (Amendment) Ordinance, 2011 was not reflecting the true spirit of surcharge to be levied for three and a half months and not for full year. Through the income tax return, collection of surcharge would be done for three and half months period as compared to whole year, which was presumed due to bad drafting of the law.