Giving a major tax relief to persons paying sales tax after due date citing solid reasons for delayed payment, the Central Board of Revenue (CBR) has decided to amend section 33 of the Sales Tax Act, 1990 in budget 2005-06 to differentiate between willful and unintentional defaulters. Official sources told Business Recorder on Monday that the tax authorities have in principle agreed to levy different types of penalties on willful and unintentional defaults.
There should be different penalties for these two categories of taxpayers under the sales tax law. In some cases, it is evident that default is due to genuine reason. For such taxpayers, the rate of penalty should be less as compared to the tax evaders.
Presently, Sales Tax Act cannot differentiate between the willful defaulters and unintentional default while levying sales tax penalty. The amendments will be made to segregate the willful defaulters from the unintentional default of the taxpayers. The rates of penalty for these two types of defaulters should be different, officials stated.
An Islamabad-based leading sales tax consultant, Tahir Razaq, opined that the amendment would facilitate the genuine taxpayers from the hardships and it would also give a stern message to the willful defaulters or tax evaders that the CBR is taking them to task from next financial year.
However, the difference of penalty should at least be 6-10 times to give a strong message for any prospective tax evasion between willful or intentional default and non-willful or unintentional default, he added.
On the income tax side, section 187 of Income Tax Ordinance 2001 contains the same provisions of penalty differentiating between an unintentional, willful and other defaults. Where a person makes a statement that is false or misleading, the person is liable to a penalty equal to, where the statement or omission was made knowingly or recklessly, 200 percent of the tax shortfall; or in any other case, 25 percent of the tax shortfall.
In the case of an assessment order under section 120, no penalty is imposed to the extent to which the tax shortfall arose as a result of the taxpayer taking a reasonably arguable position on the application of Income Tax Ordinance 2001 to the taxpayer's position.
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