FBR takes steps to improve compliance by regulators

The Federal Board of Revenue (FBR) has taken enforcement steps to improve compliance by the regulatory authorities, whose income becomes taxable under Income Tax Ordinance, 2001 from the last fiscal year.
Sources told Business Recorder on Sunday that the FBR has witnessed partial compliance by the regulatory authorities, who have to pay income tax under Ordinance 2001. The board has taken steps to ensure compliance of Ordinance 2001 by the regulatory authorities. The regulatory authorities were not bound to submit advance tax payments till now and they have to file income tax returns in September-November 2008.
In cases of non-compliance, the board is trying to cope with the situation. Without quoting name of the regulatory authority, sources said that the department has assessed one such non-compliant regulatory body. Thus, the level of compliance is gradually improving during the current fiscal year.
It is worth mentioning that the income of the regulatory authorities like Pakistan Electronic Media Regulatory Authority (Pemra);
Pakistan Telecommunication Authority (PTA); Oil and Gas Regulatory Authority (Ogra), and National Electric Power Regulatory Authority (Nepra) and other development authorities are liable to tax under Ordinance, 2001.
The board had brought Pemra, PTA, Ogra, Nepra, and other development authorities into the tax-net in last budget through a 'clarification amendment' regarding taxation of regulatory authorities through Finance Bill, 2007-08.
Sources said that the board is also bringing development authorities like National Logistic Cell (NLC) into the tax-net applying the same provisions of the Ordinance, 2001.
They said the regulatory and development authorities are taxable under the income tax law. On the other hand, the Income Tax Ordinance, 2001 was unclear about the taxability of these authorities neither being local departments nor government authorities.
The income of all the regulatory and development authorities is taxable under income tax law and Article 165A of the Constitution. Similarly, regulatory and development authorities are also covered under the definition of Income Tax Ordinance, 2001, but different views of stakeholders on taxation of income of these authorities have resulted in litigation.
In the last budget, the board had issued the 'clarifying amendment' in Ordinance, 2001 to tax income of these authorities. This amendment has specifically provided that their income is taxable.
Through Finance Bill, 2007-08, a proviso was added in section 49 of Income Tax Ordinance, 2001: "Provided that exemption under this section shall not be available in the case of a corporation, company, a regulatory authority, a development authority or other body or institution established by or under a federal law or a provincial law or an existing law or a corporation, company or other body or institution set up, owned and controlled, either directly or indirectly, by the federal government or a provincial government, regardless of the ultimate destination of such income, as laid down in Article 165A of the Constitution of the Islamic Republic of Pakistan."
The Section 49 of the Ordinance, 2001, related to income tax exemption to federal and provincial governments and local authorities.