Sea, dry ports: effective mechanism to check withholding tax evasion

The collectors of customs would put in place an effective mechanism at sea/dry ports to verify tax exemption certificates for checking withholding tax evasion on the clearance of imported consignments. Sources said on Tuesday that (FBR) system allowing exemptions or concessionary imports is being misused to avoid withholding tax in a number of cases.
The authenticity of exemption certificates issued by the commissioners also needs verification for plugging loopholes in the system. The tax concessions allowed on the imports of exempt entities having exemption certificates or under statutory regulatory order (SRO) would be examined to ascertain their admissibility.
The customs officials being withholding agents should give exemption on the basis of a valid provision of law and exemption certificates only. The updated "NTN Master Index" be linked with the customs database to verify national tax numbers (NTNs) for clearance of imports against valid NTN only.
Sources said a comprehensive scheme for allocation of tax numbers to all the imports is required. All importers should essentially have a tax number which is either NTN or a Tax Free Number and no import should be allowed without a valid tax number. The cases of transfer of residence (TR) or one-time individual imports should be processed on the basis of computerised national identity card number (CNIC).
The monitoring of withholding tax collection at the import stage is relatively easy, particularly due to automation of major sea/air ports. The periodic checking of imports with reference to exemption and collection of tax, its deposit in the bank and cross verification of exemption allowed with the tax records would be useful.
Sources said that the FBR has chalked out an action plan for better management of withholding tax collection on imports. Under the plan, the Large Taxpayer Units (LTUs) and Regional Tax Offices (RTOs) should be provided online connectivity with the customs data-base.
These units should be provided user-identity card (ID) and password for online access to Pakistan Customs Computerised System (PaCCS) and "One-Customs", clearance system. The authorised officer of each RTO should co-ordinate with customs authorities for macro analysis of imports by government/agencies and exempted imports.