Action against offshore assets: Panel approves proposal against time-limit restriction

ISLAMABAD: The Senate Standing Committee on Finance has approved a proposal for allowing the Federal Board of Revenue (FBR) to remove time limitation for taking action against owners of offshore income and assets abroad.

The issue came under discussion during the review of the Finance Bill, 2021-22, at the Senate Standing Committee on Finance, here on Thursday.

During the meeting, the committee members did not raise any objections to this new insertion into the Finance Bill for 2021-22.

Earlier, there was a restriction of five years but now there will be no time limitations, after approval of this law from the National Assembly of Pakistan through Finance Bill 2021-22.

This new clause into Income Tax Law will enable the tax machinery for moving against those who possessed foreign income and assets without any bar of time limitations.

The new clause inserted into the Finance Bill 2021-22 reads, “Provided further that the time-limitation provided under this subsection shall not apply if the Commissioner is satisfied on the basis of reasons to be recorded in writing that a person who failed to furnish his return has foreign income or owns foreign assets.”

The committee also endorsed insertion of 146C into Income Tax Ordinance 2001 stating, “Assistance in the recovery and collection of taxes, the provisions of sections 138, 138A, 138B, 139, 140, 141, 142, 143, 144, 145, 146, 146A, and 146B shall mutatis mutandis apply in respect of assistance in collection and recovery of taxes in pursuance of a request from a foreign jurisdiction under a tax treaty, a multilateral convention, an intergovernmental agreement or similar arrangement or mechanism.”

The committee again discussed powers of the FBR officers for arresting and prosecution on suspicion of concealment of income, and Senator Farooq H Naek asked the FBR not to declare Pakistan a police state.

He said that the FBR’s objective was to collect the taxes but not put people behind the bars.

Senator Naek and Senator Saadia Abbasi asked for omitting 203-A, B, and other draconian clauses.

However, the Chairman of Senate Panel Talha Mahmood was trying to find a middle way where the senators could rewrite this clause by granting powers to the chairman FBR or minister for allowing arrest of potential tax evaders.

The FBR’s Member Inland Revenue Policy, Mohammad Tariq, said that the FBR did not want rampant usage of this law but it wanted to make 30 to 50 evaders as precedent for others in order to create deterrence.

The Senate panel rejected withdrawal of income tax exemption on provident fund and medical allowances for employees.

The salary of seafarers related exemption was also considered and the FBR committed to review this proposal.

All Pakistan Textile Mills Association (APTMA) Executive Director Shahid Sattar appeared before the Senate panel and said that the government has increased sales tax on import of machinery from 10 to 17 percent in the budget, when the textile sector was investing $2.5 billion for installing green field plants in the country.

He said that as result of this policy Rs50 billion would be stuck up in the shape of refunds.

The FBR’s Member IR policy assured that the refunds would be released through FASTER as this amount got doubled in the outgoing fiscal year.

The APTMA executive director responded that the new plants would become operational after two and a half year’s period, so the liquidity crunch would make it harder because they did not know that the government would jack up sales tax rate on machinery to 17 percent.

He suggested bringing down sales tax on machinery at zero and also brought down sales tax on import of cotton.

He also said that the FBR put limitation on FASTER for releasing only 12 percent, so stuck-up refunds would not solve our problems.

Copyright Business Recorder, 2021