Senate Standing Committee on Finance Wednesday approved Income Tax (Amendment) Ordinance 2015, reducing rate of 0.6 percent withholding tax to 0.3 percent on banking instruments till September 30, 2015. Senate Standing Committee on Finance under the chairmanship of Senator Ilyas Bilour approved the said Ordinance. Federal Board of Revenue (FBR) Senior Member (Inland Revenue) Policy Shahid Hussain Asad represented the government.
Senator Ayesha Raza Farooq informed the committee that the government needs to improve revenue collection of the FBR. The government has to take tough measures for documentation of economy and broadening the tax base. We support such measures like imposition of withholding tax on banking instruments of non-filers to expand the tax base. This is a measure to bring non-filers into the formal regime for documentation of economy.
The Senator asked: how many have started filing their income tax returns following imposition of withholding tax on banking transactions of non-filers? She also inquired about the number of non-compliant persons who, since imposition of the tax, have become filers?
Responding to queries, Shahid Hussain Asad said the entire business community is not against this documentation measure. The strike calls by business community on August 1 and 4 miserably failed in effecting a complete lockdown across the country. The registration of non-filers has shown improvement in the filed formations. For example, the Chief Commissioner Regional Tax Office (TO) Lahore informed the FBR that extra counters/desks have been set up at the RTO for accepting returns of the non-filers. A number of persons have filed their returns to avoid the withholding tax on banking instruments.
Any non-filer, who becomes filer, is not required to pay withholding tax on banking instruments, Senior Member (Inland Revenue) Policy maintained. He said the government is flexible in attracting traders to file their returns by giving them concessions. For the documentation of economy, the FBR can give tax concessions to the business and trade. We are ready to give concessions to the taxpayers so that the people voluntarily file their returns. The FBR would be able to trace Benami accounts of traders, maintained in the names of their family members or servants to conceal income/turnover, through documentation measure of withholding tax on banking transactions of non-filers. There was an apprehension among the traders that if they would declare all their accounts in tax returns, their turnover would increase which would raise the ratio of turnover tax. When all accounts are declared, there would be a visible difference in the annual turnover of the business. Due to this reason, the FBR would decide about the ratio of turnover tax on a sector-to-sector basis.
If the business community declares all their bank accounts with substantial increase in sales, FBR will be ready to show flexibility to encourage voluntary compliance of traders. The FBR has adopted a flexible policy to facilitate persons ready to go for documented regime.
Meanwhile, Income Tax Amendment Ordinance 2015 dated July 11 said that it shall come into force at once. Provided that the rate specified in First Schedule in Part IV, in Division-XXI shall be 0.3 percent for the period commencing from July 11, 2015 and ending on September 30, 2015 (both days inclusive) or till the dates as the federal government may, by notification in the official gazette on recommendation of the Economic Co-ordination Committee of the Cabinet, extend, it added.
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