Proposed changes in revised CGT regime: TRCG forms 'Implementation Group'

Tax Reform Co-ordination Group (TRCG) discussed the idea of introducing a new Eighth Schedule in the Income Tax Ordinance 2001 through a Presidential Ordinance to cover all Capital Gains Tax (CGT) related issues under a separate Schedule and proposed a minimum holding period of 120 days for investment made in stock market.
After the conclusion of the daylong meeting of the TRGC headed by Advisor to the Prime Minister on Finance Dr Abdul Hafeez Shaikh here on Friday, sources told Business Recorder that the TRGC constituted an 'Implementation Group' headed by Shahid Hussain Asad, FBR Member Inland Revenue. The 'Implementation Group' would comprise TRCG members, FBR officials and SECP representatives to ensure implementation of the proposed changes in the revised CGT regime.
According to sources, it was discussed during the TRCG meeting that an Eighth Schedule be introduced in the Income Tax Ordinance 2001 to deal with all CGT related issues. Presently, the Income Tax Ordinance 2001 comprises seven Schedules and any new schedule for CGT would be Eight Schedule of the Income Tax Ordinance 2001. In case Eight Schedule is introduced in the Ordinance, it would be done through a Presidential Ordinance. Later, the new Schedule would be made part of the Income Tax Ordinance 2001 through Finance Act.
The new regime of CGT will be applicable from April 1, 2012. Another proposal was discussed to issue SRO for issuing revised CGT regime. It was also discussed to introduce minimum holding period of 120 days for investors of stock market. The minimum holding period may remain applicable for a period of two years. In this regard, the 'Implementation Group' would work out modalities for implementation of the proposal.
As per the proposal, the source of investment may not be asked from investors who would make investment for at least minimum holding period of 120 days. The tax department may seek details of investment in cases where investment has been made less than the minimum holding period of 120 days. The minimum holding period has been proposed to avoid money laundering.
The role of National Clearing Company of Pakistan (NCCPL) for deduction and depositing of tax from investors' transactions was also discussed during the TRCG meeting. The NCCPL deposits the deducted amount of the CGT in the relevant branch of the National Bank of Pakistan, sources maintained.
The members of the TRCG also discussed the idea of introducing some kind of minimum tax on creation of assets. In this regard, different members gave their proposals on the minimum tax to be imposed on assets created in future. It was discussed that there is creation of wealth in the country and if the wealth has been used for acquiring new assets, it may be subjected to minimum tax.
About the upcoming budget (2012-13), Hafeez Shaikh gave a broader guideline to the TRCG on the new budget. The Advisor to the PM on Finance said that no new tax would be imposed in the coming budget and political persons, who are not paying tax, would be brought into the tax net. It is not the government policy to impose new taxes or increase the tax rates, but the customs duties have already been brought down in last budget. The guiding principal of the new budget would remain the same as of previous fiscal year that the general public would not be burdened with taxes and taxes should be paid by those persons who are creating wealth but not operating under the tax net. The burden of taxes should be reduced on the masses and potential persons should be brought into the documented regime. Instead of burdening the existing taxpayers, the government would focus on those persons, who are not paying taxes.
Meanwhile, a press release issued by the FBR said: A day-long meeting of Tax Reform Co-ordination Group (TRCG) was held on February 24, 2012 under the Chairmanship of Advisor to the Prime Minister on Finance and Revenue, Dr Hafeez Shaikh. The TRCG members who attended the meeting included Deputy Chairman Planning Commission, Dr Nadeem-ul-haq, Chairman, SECP Muhammad Ali, Tax Reform Core Group Members Abdullah Yusuf, Arshad Zuberi, Shabbar Zaidi, Ashfaq Tola, Ali Jameel Yousuf and Mohammad Arshad Chaudhry.
During the meeting, FBR performance was reviewed and budget proposals were deliberated on. The Group recommended that the tax base be broadened, documentation increased and gradual shift from presumptive tax regime with increase in rate for presumptive tax regime towards eventual reduction in tax rate under normal tax regime.
TRCG discussed proposed changes in implementation of Capital Gain Tax aimed at simplifying the mechanism, improvement in its enforcement and broadening of the tax base. The Committee formed an 'Implementation Group' consisting of TRCG members, FBR officials and SECP representatives to ensure implementation in line with the law.
Revenue performance of FBR was also reviewed in detail. Chairman FBR, Mumtaz Haider Rizvi, apprised the Group of the taxes collected under various heads and administrative measures taken till date and the way forward for the remainder of financial year 2012.
The TRCG was apprised that up to February 22, the collection stood at Rs 1068 billion, which is 26 percent higher than the collection of Rs 847 billion in the corresponding period of the previous fiscal year. Earlier, Dr Hafeez Shaikh, while addressing the meeting, said that the guiding principles of the forthcoming Federal Budget should be to continue with the approach of simplification of taxes, avoidance of increase in taxes or the rates of taxes, fiscal incentives for growth and generation of investment and employment. He emphasised the need for an accelerated drive for direct tax collection while providing relief for the existing taxpaying citizens.
The meeting was also attended by Dr Amna Khalifa and members of the Board, Sardar Aminullah Khan, Member (Enforcement & Accounting), Shahid Hussain Asad, Member (IR), Riffat Shaheen Qazi, Member (FATE), Azra Mujtaba, Member (SP&S), Mohammad Raza Baqir, member (Admn), Hafiz Mohammad Anees, Member (Taxpayer Audit), Mohammad Nisar, Chief Collector (North), Humayun Khan Skindari, DG (PCA), Shahid Rahim Shekh, Additional Secretary, Revenue Division and Imtiaz Ahmad, GM PRAL.