ISLAMABAD – The Federal Board of Revenue (FBR) has formally restricted its officials from initiating any proceedings against individuals who availed the Tax Amnesty Scheme under the Assets Declaration Act, 2019.
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Customs initiates examining exporters to check under-invoicing, mis-declaration
KARACHI: Pakistan Customs has initiated examination of exporters’ profiles to check mis-declaration and under-invoicing for plugging revenue leakages.
A statement said on Friday that the chairman of Federal Board of Revenue (FBR) Shabbar Zaidi had directed to identify the extent of mis-invoicing in export declarations in order to ascertain the suspected items or sectors and destinations for such mis-declaration, and to categorize exporters on the basis of risk profiling by segregating compliant exporters from those engaged in mis-invoicing.
The Customs Operations wing has tasked the Director General Customs Valuation to submit a report in this regard.
It has been further directed to develop a risk based system to intercept this trend without compromising export facilitation. Punitive action shall be taken against unscrupulous exporters under the proposed Section 32 C of the Customs Act, 1969 and the allied laws.
This initiative has arisen in the backdrop of reports indicating mis-invoicing in exports, which includes under-invoicing resulting in loss of remittance of forex and over-invoicing used to transfer excessive funds abroad.
Under-invoicing could be used also possibly as a mechanism for trade-based money laundering. One of the suspected methods used in under-invoicing in exports is through the medium of via port cargo.
Export cargoes are mis-declared by under-invoicing the values of export commodities, and shipped to a via port wherein new declaration with actual values are re-shipped for a final destination.
As a consequence, lesser amount of foreign exchange is remitted to Pakistan and a major portion of export proceeds is retained in the other country.
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World Bank approves $518 million for Pakistan’s efforts to raise domestic revenue
ISLAMABAD: The World Bank on Friday approved a package of $518 million for two projects in support of Pakistan’s ambitious efforts to raise revenue and reduce compliance cost with a goal of providing better services to the people.
The $400 million Pakistan Raises Revenue Project will support the Federal Board of Revenue’s (FBR) focus to create a sustainable increase in Pakistan’s domestic tax revenue. The project will assist in simplifying the tax regime and strengthening tax and customs administration. It will also support the FBR with technology and digital infrastructure and technical skills. This will enable more effective use of taxpayer information and more targeted compliance. The Government has set improving tax revenue with low compliance costs as a high priority.
“Revenue mobilization plays an essential role in Pakistan’s fiscal sustainability,” said Muhammad Waheed, Task Team Leader of the Project. “The project will target raising the tax-to-GDP ratio to 17 percent by financial year 2023-2024 and widening the tax net from the current 1.2 million to at least 3.5 million active taxpayers.”
Pakistan’s revenue performance has improved significantly from tax policy measures in recent years, rising from 9.5 percent of GDP in financial year 2011-2012 to 12.9 percent in financial year 2017-2018. This is still lower than the level needed by developing countries, of at least 15 percent of GDP, to fund basic government functions and provide services to people.
“Creating fiscal space through revenue mobilization is critical to reduce the country’s budget deficit, enabling people of Pakistan to benefit from better public investments and services,” said Illango Patchamuthu, World Bank Country Director for Pakistan.
The $118 million Khyber Pakhtunkhwa Revenue Mobilization and Public Resource Management Project will support the Government of Khyber Pakhtunkhwa to increase its capacity for revenue collection and the management of the province’s resources. The project is anchored in the provincial government’s Public Financial Management Strategy (2017-2020) and will strengthen the government’s Public Financial Management system.
While the government of Khyber Pakhtunkhwa has made progress in revenue mobilization and management of public finances, its revenues remain low. Enhancing the tax revenue could increase its capacity to provide better services to residents. It will also reduce its dependence on federal transfers, which accounted for 86 percent of provincial revenue in the financial year 2016-2017.
“Mobilizing domestic revenue is crucial to improving human development outcomes in Khyber Pakhtunkhwa,” said Raymond Muhula, Task Team Leader of the Project. “This project will support the government’s priority to increase its own source revenue and to better manage its resources.”
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FBR asks police to provide agreements of rented properties
KARACHI: Federal Board of Revenue (FBR) has issued notices to police stations to acquire information about rented residential and commercial properties located in Karachi.
The notices have been sent to Station House Officers (SHOs) under Section 176 of the Income Tax Ordinance, 2001 to provide the information of rented houses and commercial premises.
The FBR asked the SHOs to provide information of rented agreements including address of premises, rental agreement and type of properties such as commercial or residential, according to a copy of notice made available to PkRevenue.com.
The notices have been sent by Broadening of Tax Base (BTB) Wing of Regional Tax Office (RTO)-II Karachi stating that in terms of Section 176 of the Income Tax Ordinance, 2001, the SHOs are required to furnish such information as may be required by the commissioner Inland Revenue or an authorized person relevant to any tax leviable under the Ordinance.
It further said that as per Section 3 of the Sindh Information of Temporary Residents Act, 2015, the property dealer, landlord and tenant, shall, within 48 hours from the time of delivery of possession of the rented property premises to the tenant, provide information about the tenant to the policy through the fastest means of communication.
The RTO-II asked police to provide required information by June 17, 2019. The tax office also warned of imposing penalty for non-compliance.
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FBR warns of harsh action against undeclared assets from July 01
ISLAMABAD: Federal Board of Revenue (FBR) on Thursday warned people of harsh action for possessing undeclared assets from July 01, 2019.
The revenue body said that those people having undeclared cash, assets and expenditures should declare by availing tax amnesty scheme.
FBR reiterates that the closing date for Assets Declaration Scheme is 30th June, 2019.
Therefore, it is advised to the persons intending to avail this scheme to ensure that the following reliable data relating to undeclared and undisclosed assets and expenditure is available with FBR:
a) Data of industrial and commercial gas and electricity consumers from various DISCOs and gas distribution companies has been procured to identify the persons who are chargeable to tax but have not been paying their due taxes.
b) That there is complete cooperation between the banks and the FBR on the availability of data relating to withholding taxes and other relevant information especially related to non-filers.
c) That FBR in collaboration with NADRA is providing access to the concerned persons (confidentially) for the transactions undertaken in the past in order to let the people know the transactions undertaken by them. This data will be available through secure channels from NADRA on demand subject to certain fee.
d) That it is planned that bearer certificates such as bearer prize bonds will be converted into registered prize bonds over a period of time as specified by the State Bank of Pakistan in coming months.
e) FBR is in contact with the land record authorities and relevant District Collectors with regard to shops and establishments for identifying the business establishments within their respective areas.
f) That administrative setup is being placed for operation of the Benami Law and it is expected to be fully operational from July 1, 2019.
In the light of the aforesaid points, it is advised that the concessions and benefits laid down in the Scheme be availed.
Furthermore in the Finance Bill 2019 it has been further reassured that no proceedings will be initiated against persons who declare their assets under the Assets Declaration Scheme and complete confidentiality shall be maintained with respect to assets declared in the scheme.
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Consumers allowed 5pc cash back of sales tax paid on retail purchases
ISLAMABAD: Consumers have been allowed to get five percent cash back on the total amount of sales tax charged against purchases from retail outlets.
Through Finance Bill, 2019 a major change has been introduced to Sales Tax Act, 1990 in order to widening the sales tax base and prevent sales tax evasion.
The Finance Bill 2019 proposed:
“Provided that the customers of a Tier-1 retailer shall be entitled to receive a cash back of up to five percent of the tax involved, from such date in the manner and to the extent, as may be prescribed by the Board.”
The Sales Tax Act, 1990 defines Tier-1 retailers as:
(a) a retailer operating as a unit of a national or international chain of stores;
(b) a retailer operating in an air-conditioned shopping mall, plaza or centre, excluding kiosks;
(c) a retailer whose cumulative electricity bill during the immediately preceding twelve consecutive months exceeds Rupees six hundred thousand; and
(d) a wholesaler-cum-retailer, engaged in bulk import and supply of consumer goods on wholesale basis to the retailers as well as on retail basis to the general body of the consumers;”
The FBR explained the amended regime for retailers that to rationalize tax on retailers and to capture its full potential and document its sales, following proposals are made:−
(i) Turnover tax option may be withdrawn.
(ii) For tier-1 retailer, it may be made mandatory to integrate their points of sales (POSs) with FBR’s Computerized System so that the sales are reported in real time.
(iii) Retail shops having an area in excess of 1000 square feet may be included in Tier-1.
(iv) In order to encourage customers to demand invoices from retailers, enabling provisions are proposed to be inserted in section 3 whereby FBR may allow cash back of up to 5% of the sales tax charged on invoices to the customers.
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FBR estimates additional revenue of Rs2 billion through changes in super tax
ISLAMABAD: Federal Board of Revenue (FBR) has estimated additional revenue of Rs2 billion through proposed changes in law related to super tax.
The changes have been introduced to Section 4B of Income Tax Ordinance, 2001 through Finance Bill 2019.
The FBR in explanation to the Finance Bill said that presently brought forward depreciation and business losses are excluded while computing income for calculating liability of super tax.
However, such losses are not excluded in the case of banking, insurance, oil and mineral exploration companies.
In order to ensure similar tax treatment, brought forward business and depreciation losses have been excluded from income computed to calculate super tax in the case of the abovementioned sectors.
FBR sources said that Large Taxpayers Unit (LTU) Karachi had submitted its proposals related to super tax with estimated revenue generation of Rs2 billion.
The LTU Karachi in its proposals said that the proposed amendment would bring uniform chargeability of super tax to all taxpayers including taxpayers falling within the purview of Fourth, Fifth, Seventh and Eighth Schedules of Income Tax Ordinance, 2001.
Fourth Schedule mainly deals with Insurance companies.
Fifth Schedule is related to exploration and production companies.
Seventh Schedule is about banking companies.
While Eighth Schedule covers capital gains and National Clearing Company Pakistan Limited (NCCPL).
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Duty exemption on foreign bandwidth services withdrawn
The Federal Board of Revenue (FBR) has announced the withdrawal of duty exemption on foreign bandwidth services provided by telecom operators.
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FBR empowered to probe foreign remittances above Rs5 million received in a year
ISLAMABAD: Federal Board of Revenue (FBR) has been empowered to probe source of foreign remittances above Rs5 million received by a person in a year.
According to Finance Bill 2019, an amendment has been proposed to Section 111(4) of Income Tax Ordinance, 2001 in this regard.
At present the FBR cannot ask source to any amount of foreign exchange remitted from outside Pakistan through normal banking channels up to Rs10 million in a tax year that is encashed into rupees by a scheduled bank and a certificate from such bank is produced to that effect.
However, this threshold has been reduced to Rs5 million.
FBR sources said that the proposal had been introduced through Finance Bill 2019 to shut the window for whitening of money.
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Finance Bill 2019: Advance tax increased by 900 percent on renewal of license by arhatis
ISLAMABAD: The government has increased the advance tax by 900 percent (nine times) at the time of renewal of license by middleman of a commodity markets in agriculture sector.
The tax rates have been increased through Finance Bill, 2019 and may be applicable from July 01, 2019.
The Federal Board of Revenue (FBR) said that presently every market committee is required to collect advance tax from dealers, commission agents and arhatis at the time of issuance or renewal of licenses.
Now the tax rates are being increase for:
Class A from Rs10,000 to Rs100,000/-,
Class B from Rs7,500 to Rs75,000/-,
Class C from Rs5,000/- to Rs50,000; and
for any other category from Rs5,000/- to Rs50,000/-.
The tax has been collected under Section 236J of Income Tax Ordinance, 2001.
According to the section:
“236J. Advance tax on dealers, commission agents and arhatis etc.— (1) Every market committee shall collect advance tax from dealers, commission agents or arhatis, etc. at the rates specified in Division XVII of Part-IV of the First Schedule at the time of issuance or renewal of licences.
(2) The advance tax collected under sub-section (1) shall be adjustable.
(4) In this section “market committee” includes any committee or body formed under any provincial or local law made for the purposes of establishing, regulating or organizing agricultural, livestock and other commodity markets.”