ISLAMABAD: The government has decided to use data of power distribution companies (DISCOs) and telecom companies for broadening of tax base by making a fully automated system operational from the July 1st, 2020, for sales tax registration.
This was disclosed by the senior officials of the Federal Board of Revenue (FBR) during discussion on Finance Bill 2020 on Wednesday. The FBR Chairman, Nausheen Javaid Amjad, added that a new system would be put in place from July 1st for registration of sales tax, which would be fully automated, and under the system unreadable evidence in the form of video would be obtained of the premises. The meeting was told that the government would provide hardware and software to the DISCOs and mobile companies, and would ask them to provide complete information of their consumers.
The committee members said that every year, the FBR brings some very good proposals for broadening of tax base but without any result, therefore, "we will review the progress made by the tax authorities on this proposal by November 2020, decided the finance committee unanimously.
Dr Hamid Attique Sarwar, member Inland Revenue Policy, stated that data of the DISCOs and mobile companies, was being used for burdening, and regretted that of the total around 300,000 industrial power connections, only 18 thousands were registered, while there were only 3.2 million commercial connections of electricity in the country but hardly 325,000 were registered with the tax authorities.
He said that though the situation was very bleak, this was the only way for broadening of tax base.
In reply to a question about lowering sales tax rate, member FBR said that the sales tax collection had been Rs1,700 billion and one percent reduction in sales tax had Rs100 billion revenue impact.
He said that bringing down the sale tax to five percent means Rs1,200 billion hit to the revenue, and unlike developed and other countries where 100 percent retail sector was in the tax net, Pakistan collects 99 percent sales tax from manufactures, and not from the retailers.
Hamid Attique said that if sales tax collection from retail sector would be 100 percent, tax authorities could afford to reduce sales tax rate to five percent.
Some senators suggested that the government should have taken extraordinary measures to deal with the extraordinary situation, and reduced the sale tax to create demand and revive the economy.
The committee also approved abolishment of capital value tax (CVT) on properties and shares in the federal capital territory after the FBR officials stated the CVT on property had now been a provincial subject after the passage of 18th Constitutional Amendment.
The meeting of the finance standing committee reviewed amendments made to the Customs Act, 1969 and the sales tax provisions of Finance Bill, 2020, and discussed in detail amendments pertaining to carrying, transporting, removing, depositing, harbouring, keeping concealing of transit goods or evading payment of custom duties or leviable taxes in great detail.
The committee rejected amendments related to authorised economic operator programme and concessions on raw material for the concession holder, and its operating companies in Gwadar.
The committee decided to look at the matter closely due to mention of 20-year period in the original document that had been changed to 40 years in the bill.
The committee took notice that amendments relevant to tax exemptions related to Gwadar Port were not according to the tax law and rules.
The committee directed the secretary Maritime Affairs to provide all agreements of contractors and sub-contractors to the committee tomorrow morning.
The issue will be taken up today (Thursday) again.
During committee proceedings, the committee members were not satisfied with the explanations of secretary Maritime Affairs who tried to explain the rationale behind the proposed exemptions.
On the request of PTI Senator Mohsin Aziz, the committee gave another time to the secretary to give names of the contractors and sub-contractors to the committee who will avail these exemptions.
Farooq H Naek asked the secretary to present before the committee the agreement of the government for Gwadar port handling with the Singaporean company in 2007.
The agreement was later sold to the Chinese company in 2013.
"We need the copies of two original agreements," he said.
Farooq H Naek also asked the secretary to present names, details of ownership of contractors, sub-contractors, resolution of the National Assembly rejecting exemption to Gwadar port free zone and ordinance copy under which tax exemptions were given.
Senator Ayesha Raza informed the committee that the parliamentary panel had been misguided on the issue of duty exemptions to Gwadar free zone area.
On this issue, Senator Dr Musadik Malik said there should be transparency in everything and the government should not further amend the original agreements to give "benefits" to certain people.
"I will try my best to bring all these documents to the committee tomorrow," the secretary maritime affairs said.
However, senators strongly recommended that it would be binding to disclose everything to the legislators ahead of approving the amendments.
While reviewing the sales tax provisions, the committee deliberated over issues of Alternative Dispute Resolution, real time access to information and databases and deliberated on tax exemption on diabetic foods, conducting of audit proceedings electronically, raw materials and intermediary goods imported by manufacturers for in-house consumption were also discussed.
The amendment was approved by majority senators.
However, Senator Farooq Naek recommended to the FBR to include the clause of appeal in it.
The committee also unanimously rejected the FBR amendment, which says that the bundle of proof will lie on the accused.
The committee approved amendments in Customs Act 1969, pertaining to the extending the scope of smuggling, introducing higher penalties, reducing the seizures detection time of goods to 15 days, repayment of regulatory duty to exporters, the inclusion of under-invoicing in the ambit of fiscal fraud, adjudication of cases within 30 days under the Finance Bill 2020.
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