Hakeem looks forward to documenting 'black economy'

The new FBR Chairman, Ali Arshad Hakeem, appears to be very keen to bring the so-called 'black economy' into formal regime. Tax authorities, it is learnt, consider implementation on SRO191(I)/2011 a major step taken last year. Experts told Business Recorder here on Friday that the Former FBR Chairman Mumtaz Haider Rizvi had given policy approval for rescinding the SRO191(I)/2011 which was a major measure to document national economy.
A summary was moved to the Ministry of Finance for rescinding the biggest documentation measure. If this SRO had been implemented in its true spirit from this fiscal 2012-13, this could have been the first step towards implementation of the vision of new chairman for curtailing the black economy. This would document the supplies made to un-registered persons in 2012-2013.
Experts opined that SRO191's withdrawal would be counterproductive in broadening the tax-base. It is expected that the new FBR team would analyse the pros and cons before rescinding the major documentation measure.
In his first address to officials of Pakistan Customs Service and Inland Revenue Service (IRS), the new FBR Chairman highlighted whitening of the black economy.
The SRO, viewed as an important tool to document unregistered buyers within the sales tax supply chain, had been resisted by certain powerful lobbies/influential groups.
Under the SRO, importers, exporters and manufacturers were required to submit the Computerized National Identity Card numbers (CNICs) and National Tax Number (NTNs) of unregistered buyers in sales tax returns. With the help of this major measure, the FBR tried to document business units and persons who wanted to remain out of the formal regime and were not ready to share information about their unregistered buyers.
Later, a number of business representatives pressurised the tax authorities to suspend the key documentation measure.
Despite revamping the entire SRO keeping in line with suggestions of stakeholders, certain traders were still not ready to provide basic information of their unregistered buyers in a phase-wise manner.
In this way, the biggest documentation measure remained suspended for the last many months.
The question arises that whether the new FBR team would continue with the policy of rescinding SRO191 or this key documentation measure may be implemented in 2012-13.
In budget (2012-13), the FBR had submitted two key proposals to the Ministry of Finance for obtaining basic particulars of the unregistered buyers. Under the first proposal, SRO 191(I)/2012 was proposed to be abolished in the budget (2012-2013). The FBR proposed to make it mandatory for registered persons to collect 3 percent 'further tax' from unregistered buyers.
The second proposal was that the SRO would continue to operate in 2012-2013 with suitable modifications / amendments in controversial clauses of the notification. The implementation of the second proposal required re-drafting of the SRO to limit disallowance of input tax adjustment. In this regard, the clause pertaining to disallowing input tax adjustment was proposed to be limited to 10% of the amount of input tax claimed.