Pkrevenue.com

Tag: Federal Board of Revenue

The Federal Board of Revenue is Pakistan’s apex tax agency, overseeing tax collection and policies. Pakistan Revenue is committed to providing timely updates on the Federal Board of Revenue to its readers.

  • Finance Bill 2019: Law proposed to initiate criminal proceedings against FBR officials

    Finance Bill 2019: Law proposed to initiate criminal proceedings against FBR officials

    ISLAMABAD: The government has framed law to initiate criminal proceedings against officers and officials of Federal Board of Revenue (FBR) for committing corruption.

    A new section 216A to Income Tax Ordinance, 2001 has been proposed through Finance Bill, 2019 as part of the budget 2019/2020 to initiate criminal proceedings against FBR officials.

    The FBR said that in order to effectively check misuse of authority to gain financial benefit, a new enabling provision is being introduced to prescribe rules for initiating criminal proceedings against officers and officials of the Board who deliberately commit acts or fail to act for personal benefits.

    Similar action would also be taken against persons who offer bribes or other financial benefits to the tax employees.

    The proposed section is as follow:

    “216A. Proceedings against persons.—(1) Subject to section 227, the Board shall prescribe rules for initiating proceedings including criminal proceedings against any authority mentioned in section 207 and officer of the Directorates General mentioned in Part II and Part III of Chapter XI including any person subordinate to the aforesaid authorities or officers of the Directorates General who willfully and deliberately commits or omits an act which results in personal benefits and undue advantage to the authority or the person or taxpayer or both.

    (2) Where proceedings under sub-section (1) have been initiated against a person or authority, the Board shall simultaneously intimate the relevant Governmental agency to initiate criminal proceedings against the taxpayer.

    (3) The proceedings under this section shall be without prejudice to any liability that the authority, person or taxpayer may incur under any other law for the time being in force.”

  • No provision for non-filers to purchase immovable property, motor vehicle: FBR

    No provision for non-filers to purchase immovable property, motor vehicle: FBR

    ISLAMABAD: Federal Board of Revenue (FBR) has said that no such provision was proposed through Finance Bill 2019 to allow non-filers to purchase immovable property or motor vehicles.

    In a statement on Wednesday, the FBR strongly refuted the news appearing in some sections of press which states that the new Finance Bill has allowed the non-filers to purchase immovable property or cars.

    The actual position is that the whole system of recognizing a non filer as a legal entity has been done away with in the new Finance Bill.

    FBR has explained that under Income Tax Ordinance, every person earning taxable income ought to file his Income Tax Returns.

    In case of failure of filing of Returns by persons involved in significant monetary transactions, a complete mechanism has been provided in the newly inserted 10th Schedule.

    such persons will not only have to pay 100 percent more tax at Withholding stage but will also be automatically assessed to tax and his imputable income will be treated as concealed income liable to penalties and prosecution.

  • Finance Bill 2019: Amnesty on immovable property purchase withdrawn

    Finance Bill 2019: Amnesty on immovable property purchase withdrawn

    ISLAMABAD: The government has withdrawn a permanent amnesty for not explaining the source of investment in purchasing immovable properties.

    The government has proposed to withdraw this provision through Finance Bill, 2019 as part of budget 2019/2020, presented on Tuesday.

    The Federal Board of Revenue (FBR) in its income tax salient features said that 3 percent tax for not explaining the source of investment is being withdrawn.

    Section 236W was introduced to Income Tax Ordinance, 2001 through Income Tax (Fourth Amendment) Act, 2016 dated December 02, 2016. This section was granted immunity from declaring source of investment for the purchase of immovable properties.

    The FBR said that in Pakistan the Real Estate sector is one of the biggest sources of money laundering and is used as a parking lot for untaxed as well as ill-gotten money.

    In view of this a wide range of steps have been taken to restructure the taxation of this sector.

    The various steps being taken are as under:-

    (i) At present, the Board has issued valuation tables of immovable properties in 21 major cities wherein such properties are valued at a value higher than the DC rates. The purchasers are also required to pay 3 percent tax on the difference between the DC value and FBR value of property to explain the source of investment to the extent of differential between FBR value and DC value. The rates notified by the Board are still considerably lower than actual market value. It is therefore intended that FBR rates of immovable properties would be taken closer to or about 85 percent of actual market value.

    (ii) As the increase in FBR values of immovable property is going to increase the incidence of tax on genuine buyers and sellers, the rate of withholding tax on purchase of immovable property is being reduced from 2 percent to 1 percent.

    (iii) At present, withholding tax on purchase of property is attracted only if the value of property is more than four million rupees. The threshold of four million rupees is being abolished and withholding tax on purchase is to be collected irrespective of the value of property.

    (iv) At present, there is no withholding tax on sale of property if the property is held for a period of more than three years. Since capital gain is to be taxed under normal tax regime even beyond the period of three years, withholding tax on sale of property would be collected where the holding period is up to five years.

    (v) Presently the law imposes restriction on registration or transfer of property having fair market value exceeding rupees five million in the name of a non-filer. The aforesaid restriction placed on purchase of immovable property is being withdrawn.

  • Finance Bill 2019: Final Tax Regime withdrawn

    Finance Bill 2019: Final Tax Regime withdrawn

    ISLAMABAD: The government has decided to withdraw Final Tax Regime (FTR) and bring various sectors into the documented economy.

    The FTR has been proposed to be abolished through Finance Bill, 2019 as part of budget 2019/2020, which was presented on Tuesday.

    The Federal Board of Income tax by its inherent nature is tax charged and levied on income.

    However presently persons involved in certain transactions are not required to pay tax on their actual profit.

    Instead, the tax collected or deducted on these transactions is treated as final tax liability.

    This regime is available persons to such as commercial importers, commercial suppliers of goods, contractors, persons deriving brokerage or commission income and persons earning income from CNG stations.

    “The tax collected or deducted from the aforesaid persons shall now be treated as minimum tax liability except for exporters, persons winning prizes and sellers of petroleum products.”

    This measure is designed as a first step for gradual phasing out of the final tax regime and transition to income based taxation for all persons.

  • Budget 2019/2020: Rs5,550 billion tax collection target set to reduce fiscal deficit

    Budget 2019/2020: Rs5,550 billion tax collection target set to reduce fiscal deficit

    ISLAMABAD: State Minister for Revenue Muhammad Hammad Azhar on Tuesday said that the government has set a challenging target of Rs5,550 billion revenue collection target for Federal Board of Revenue (FBR) in order to reduce the fiscal deficit.

    Presenting budget for fiscal year 2019/2020 on floor of house, the state minister said that by reducing imports and aiming for higher exports.

    “We want to bring current account deficit from $13 billion estimated this year to $6.5 billion in 2019-20,” he said.

    For increasing exports, the government will:

    Support duty structure on raw materials and intermediate goods

    Improve mechanism for tax refunds

    Provide electricity and gas at competitive cost

    Redo the Free Trade Agreements and make Pakistan part of the global value chain.

    He said that a challenging target of Rs.5,555 billion FBR revenue collection will be combined with aggressive expenditure controls to reduce primary deficit to 0.6 percent of GDP.

    Both the civil and military governments have announced unprecedented reduction in expenditure.

    He said that the government’s top priority is to enhancement of taxes.

    Pakistan has one of the lowest tax-to-GDP ratios at below 11 percent which is lower than others in our region. Only 2 million people file income tax returns – of which 600,000 are employees. 380 companies alone account for more than 80 percent of the total tax.

    There are over 341,000 electricity and gas connections – but only 40,000 are registered with sales tax.

    Only 1.4 million out of 3.1 million commercial consumers pay tax. There are estimated 50 million bank accounts but only 10 percent pay taxes. Out of 100,000 companies registered with Securities and Exchange Commission of Pakistan (SECP only half pay tax.

    Many rich do not to contribute to our taxes. This has to change in Naya Pakistan.

    Austerity shall be put in place in the regular civil and defence budgets. As a result, the running of civil government which was Rs.460 billion this year, is being budgeted at Rs.437 billion for the coming year, a decrease of 5 percent.

    The defence budget is being maintained at the last year level of Rs.1,150 billion. “In taking these difficult decisions on austerity, I want to appreciate the wisdom of the Prime Minister and the support of armed forces leadership in particular the Army Chief. Let me be clear on one point the sovereignty and defence of Pakistan is paramount.”

    All other considerations are secondary to that of national dignity and honour. We will ensure that the capacity of our armed forces to defend our country and our people is never compromised.

    Pakistan cannot develop until we reform our tax system. Historically, we have under allocated for health, education, drinking water, municipal services, and things that matter to the people. Now we are reaching a point where we have difficulty in paying our debts and even our salaries without recourse to borrowing. This situation has got to change.

  • Share of indirect taxes increases to 60.9 percent: Economic Survey

    Share of indirect taxes increases to 60.9 percent: Economic Survey

    ISLAMABAD: Despite claims of authorities to increase the share of direct taxes in total revenue, the share of indirect taxes further increased to 60.9 percent in 2018/2019.

    The Economic Survey 2018/2019 launched a day earlier, stated that the tax structure in Pakistan is skewed towards indirect taxes.

    The share of indirect tax to FBR tax collection remained static around 60 percent over the last one decade.

    “For fiscal year 2018/2019, the share of indirect tax collection set at 60.9 percent.”

    Within indirect taxes, sales tax posted a growth of 11.8 percent in FY2018 against 2.0 percent increase in FY2017.

    Strong aggregate demand and pass through of high international oil prices contributed in sales tax collection during FY2018.

    The share of sales tax which constituted 64.4 percent of indirect taxes during FY2018 reduced gradually from 72.3 percent in FY2014.

    Similarly, share of sales tax in total FBR tax is gradually coming down since FY2014 from 44.2 percent to 38.6 percent during FY2018.

    “For FY2019, sales tax collection target set at Rs 1,700 billion which is 14.5 percent higher than last year collection and (constitute 63.0 percent of indirect tax and 38.3 percent of FBR tax collection target).”

    The share of custom duty in indirect taxes has increased gradually from 17.6 percent in FY2014 to 26.4 percent in FY2018.

    It is pertinent to mention that the maximum statutory rates of customs duty have been gradually reduced from 125 percent in FY1988 to 20 percent in FY2016 till date.

    Consequently, the share of custom duty in FBR tax collection has reduced gradually from 45.7 percent in FY1991 to 15.8 percent in FY2018.

    Custom duty collection momentum continued with the same pace and registered a growth of 22.5 percent in FY2018 against 22.8 percent in FY2017.

    High aggregate demand, increase in general income level, high imports, higher commodity prices, exchange rate depreciation and fiscal measures such as regulatory duties on non-essential imports and an increase in additional custom duty by 1 percent led to increase in growth of custom duty.

    Custom duty collection is estimated at Rs 735.0 billion for FY2019 which reflects an increase of 20.8 percent over last year actual tax collection.

    On the other hand, the share of federal excise duty in indirect taxes declined by 9.3 percent in FY2018.

    The tax base of Federal Excise Duty (FED) contracted over the years and now is restricted to only few commodities like cigarettes, cement, beverages, and international travel etc. Share of FED in total FBR tax collection has also fallen from 10.1 percent in FY2009 to 5.6 percent in FY2018.

    FED registered a growth of 7.9 percent in FY2018 compared to 5.2 percent in FY2017. Collection from cement mainly fueled this growth momentum. FED is projected to Rs 265.0 billion which is 24.1 percent higher as compared with actual last year collection.

    The projected share is 6.0 and 9.8 percent of FBR and indirect tax collection, respectively for FY2019.

  • FBR to force all NTN holders for filing tax returns

    FBR to force all NTN holders for filing tax returns

    ISLAMABAD: Federal Board of Revenue (FBR) has chalked out a comprehensive plan to broaden the tax base by enforcing tax returns in the case of all National Tax Number (NTN) holders.

    According to Economic Survey 2018/2019 released on Monday said that the FBR would take following measures to broaden the tax base:

    — Creation of a central data bank

    — Enforcement of return in the case of all NTN holders

    — Preparation of directory of non-filers deductees

    — Data to be obtained from NADRA, Telecom Cos, Banking Cos, Development Authorities, Schools, Clubs, Hotels etc

    — Data of suppliers/buyers of sales tax returns of 5,000 big companies

    — Raising expenditure on revenue collecting machinery from 0.8% to 1.5% of total revenue

    — Registration of persons subjected to withholding of sales tax

    — Registration of retailers under the new scheme introduced under Special Procedure Rules.

    — Deployment of Technology to Identify Risk Areas to Support Risk Based Audit

    It said that an audit plan has been reintroduced to accompany the self-assessment scheme and to overcome weak tax compliance.

    Substantial progress has been achieved for infrastructure upgradation and development with the introduction of the fully Inland Revenue Information System (Iris), which is available to all the field formations.

    A paradigm shift from simple random selection to Parametric Computer Ballot selection of cases and finally risk based selection in audit has been introduced. Moreover, litigation against General Audit Policies was successfully defended before different Courts of Law.

    Under the reform initiatives, Draft Audit policy for the Tax Year 2017 is under consideration and will be finalized after due deliberation/consultation with all concerned.

    Moreover, Risk-based Audit Framework is being devised to ensure a more targeted and focused approach with the help of World Bank. Training modules have been prepared to import Investigative Audit Training to officers with the help of World Bank.

    In order to promote tax culture, compliance and to dispel the general impression about evading taxation by individuals having prominent position in the society, FBR has under taken following initiatives for bringing a behavioral change regarding the tax culture perception in the society:

    a) Publishing Tax Directory of Parliamentarians

    b) Establishment of Financial Investigation Cell

    c) Campaign against Tax Evaders

    To simplify procedures and minimize contact between the taxpayers and the tax collectors, FBR management has made revolutionary changes in automation of tax procedures. Major achievements include:

    i. Web Based One Customs (WeBOC) System of Clearance

    ii. EDI – Electronic Data Interchange

    iii. National Single Window (NSW)

    iv. iv. Inland Revenue Information System (Iris)

    Current initiatives

    − Creation of Tax Policy Unit within Ministry of Finance

    − Identification and scrutiny of evasion by High Net worth Individuals

    − Administrative measures to increase tax collection by identifying untaxed wealth overseas and by data matching to identify non-filers

    − Practical steps taken to curb Offshore Tax Evasion (UK and UAE properties, Panama and Paradise Leaks, etc.) and continuous monitoring of such cases

    − Plaza Mapping at Lahore, Karachi and Islamabad

    − Launch of Device Identification, Registration and Blocking System (DIRBS) to control smuggling of mobile devices

    − Introduction of Currency Declaration System and Advanced Passenger Information System at major airports of the country

    − Discouraging imports of luxurious goods through additional Regulatory Duties (RDs)

    − Addressing under invoicing by signing MOU with China for exchange of pricing information

    − Forensic audit in Sugar, Tobacco and Steel Industries to address leakages and tax evasion and in these industries

    − Implementation of Tobacco Track & Trace System

    − Resolving pending litigation

    − Collection of pending arrears identified as collectable arrears

    − Resolving 1.2 million automatically selected cases for audit U/s 214D

    These reforms will start paying dividends in shape of improved compliance, higher revenue growth and improvement in tax-GDP ratio.

    The tax revenues have increased significantly during last four years. The collection jumped from Rs 1,946 billion in FY2013 to Rs 3,844 billion in FY 2018, registering an overall growth of 97.5 percent.

    Similarly, tax-GDP ratio of the country which was just 8.7 in FY2013 jumped to 11.1 in FY 2018.

    With the help of these initiatives, FBR is moving towards a more efficient tax system; facilitating taxpayers, promoting investment and broadening the tax base in the years to come. It is envisioned that these resource mobilization efforts will result in further improvement of domestic tax revenues in coming years.

  • FBR nominates focal persons for tax amnesty scheme

    FBR nominates focal persons for tax amnesty scheme

    ISLAMABAD: Member Inland Revenue – Policy has been nominated as the chief coordinator for successful implementation of tax amnesty scheme 2019.

    A notification issued on Monday, the FBR designated Inland Revenue officers for the implementation of the tax amnesty scheme 2019.

    The following officers have been nominated as focal persons:

    Dr. Hamid Ateeq Sarwar, Member Inland Revenue – Policy, Chief Coordinator;

    Faiz Ellahi Memon, Chief Commissioner-IR, Large Taxpayers Unit (LTU) Karachi, Coordinator South covering provinces of Sindh and Balochistan;

    Bashir Ullah Khan, Chief Commissioner-IR, Regional Tax office, Rawalpindi, Coordinator North, Province of Khyber Pakhtunkhwa, Islamabad Capital Territory and areas falling within the jurisdiction of RTO Rawalpindi; and

    Asim Majeed Khan, Chief Commissioner-IR, LTU Lahore, Coordinator Central covering province of Punjab (excluding areas falling within the jurisdiction of RTO Rawalpindi).

    The coordinators would further nominate focal persons in each RTO and LTU falling within their jurisdiction for the implementation of asset declaration scheme.

    The FBR asked the chief commissioners-IR to transmit data relating to the asset declaration scheme on daily basis to the Chief Coordinator.

  • Proposals for budget 2019/2020 finalized; salary persons may get increase; rise in additional customs duty likely

    Proposals for budget 2019/2020 finalized; salary persons may get increase; rise in additional customs duty likely

    ISLAMABAD: The ministry of finance has finalized proposals for budget 2019/2020 and will get approval from the Cabinet before presenting in the Parliament on June 11, 2019.

    Prime Minister Imran Khan will chair the cabinet meeting on Monday in which the budget with record deficit will be approved.

    The sources said that the cabinet would approve budget with estimated Rs3,000 billion deficit.

    According to the proposals, the budget allocation for the defence would be around Rs1,250 billion, which will less than the allocation for the outgoing fiscal year.

    An amount of Rs2,500 billion has been proposed for the payment of interest on the loan, the sources said.

    The government may allocate Rs925 billion for the federal development expenditures.

    The Federal Board of Revenue (FBR) may be assigned Rs5,500 billion as tax target for the fiscal year 2019/2020. While, the estimated earning from non-tax revenue may be at Rs1,250 billion.

    The tax proposals would include:

    Sales tax on sugar would be increased from 17 percent from existing 8 percent.

    Income tax has been proposed on the earning of middle-man.

    Increase in duty and taxes has been proposed poultry, electron and several other items.

    Increase in additional customs duty is recommended from 2 percent to 3 percent.

    Abolishing zero rating for five export sectors is also part of proposals. It is worth mentioning that the prime minister has already announced to abolishing subsidy to zero-rated sector.

    The government likely introduce soft loan program for youth. An amount of Rs5 billion would be allocated for establishing agriculture institute.

    Decrease in fertilizers prices would be recommended.

    The government employees and pensioners may get increase of 10-15 percent. The proposal of increasing pay and pension would get approval at the cabinet meeting.

  • Profit on banking deposits: High tax rate planned for non-filers in budget 2019/2020

    Profit on banking deposits: High tax rate planned for non-filers in budget 2019/2020

    ISLAMABAD: A sharp increase in withholding tax rate (may be up to 30 percent) on profit on banking deposits has been planned for non-filers in order to make it almost impossible to stay remain unregistered, sources said.

    Sources told PkRevenue.com that Federal Board of Revenue (FBR) a large sum of banking system deposits were remained undocumented resulting large number of people out of tax net and massive tax evasion.

    Under Section 151 of Income Tax Ordinance, 2001 the withholding tax rate on profit on debt for filers is 10 percent with no limit on earned amount and 10 percent for non-filers up to Rs 0.5 million. However, 17.5 percent withholding tax rate for non-filers driving profit on debt above Rs0.5 million.

    The sources said that the tax rate for non-filers driving profit on debt above Rs0.5 million may be increased to 30 percent.

    According to State Bank of Pakistan (SBP) the total deposits of the banking system reached to all time high of Rs13.456 trillion by March 2019.

    The sources said that the proposed increase in profit on debt would force the people having undocumented or black money parked in the banking system to file their returns in order to reduce the tax impact.

    In return, the sources said, the FBR would get information of people having large amounts in the banking system.