Legislation to encourage tax non-compliance

Legislation to encourage tax non-compliance

KARACHI: All efforts of tax collecting agency in broadening of tax base will be in vain due to changes introduced to tax laws by the present government, which allows non-compliant taxpayers to make transactions.

The government through Finance Supplementary (Second Amendment) Bill, 2019, which was passed by the national assembly, allowed non-filers of income tax returns to purchase locally assembled motor vehicles of any engine capacity.

Though the decision was made to generate more revenue through high rate of withholding tax for non-filers but this would discourage compliant taxpayers.

Whereas through Finance Act, 2018 a Section 182A late filers of income tax returns have been deprived of appearing on the Active Taxpayers List (ATL), which is mandatory for availing reduced withholding tax rates applicable on various transactions for compliant taxpayers.

In a realistic approach if the government allowed late filers, who filed their returns after due date, to appear on the ATL then more people would file their returns in order to purchase motor vehicles as it has been done in the case of purchasing immovable properties.

Another change brought through Finance Supplementary (Second Amendment) Bill, 2019 was allowing commercial importers into Final Tax Regime (FTR).

It is surprising that business community belonging to industrial associations strongly proposed bringing commercial importers into the FTR from minimum tax regime, where tax rates are comparatively lower.

It is obvious that the commercial importers do not want to declare their transactions and want to stay remain out of audit proceedings.

The government has already allowed several concessions and exemptions to industrial sector, especially the export sector for importing raw material.

Allowing commercial importers an audit free regime when the country is facing challenges of money laundering will be problematic.

It is pertinent to mention here that associations of foreign investors and multinational companies do not want relaxation to commercial importers and termed it would be counterproductive for documentation of economy.

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