Tax Laws (Third Amendment) Ordinance, 2021: Senate body rejects most provisions

ISLAMABAD: Senate Standing Committee on Finance, Thursday, out rightly rejected most of the provisions of the Tax Laws (Third Amendment) Ordinance, 2021 including mandatory condition for the corporate sector to switch over to the digital mode of payments from December 1, 2021.

While reviewing the Tax Laws (Third Amendment) Ordinance, 2021, here on Thursday at the Parliament House, the Finance Committee also rejected an enabling provision for making facilitator of online market place to operate as withholding agent under Eleventh Schedule to the Sales Tax Act, 1990.

The committee also rejected the FBR’s powers for disabling of mobile phones or mobile phone SIMs; discontinuance of electricity connection; and discontinuance of gas connection of persons who are not appearing on the Active Taxpayer List (ATL) but are liable to file return.

Senator Saleem Mandviwalla informed the committee the whole business in Karachi works through cheques. The implementation of the digital mode of payment would emerge as a biggest issue for the entire business and trade.

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The tax authorities of the FBR should explain that how we will carry out our businesses after implementation of the digital mode of payment. If cheques are revolving in the market, this does not mean that there is any tax evasion or tax avoidance.

Most of the markets in Karachi use cheques for doing businesses and not for avoiding taxes. These cheques are a form of guarantee or promissory notes. “How we will do business without cheques?”, he questioned FBR officials.

Mandviwalla further said that the cheque is a document, but it is not necessary that businessman is making payment through cheque, but it as a guarantee in the market.

Senator Mohsin Aziz also rejected the FBR’s move of digital mode of payment. There is a cycle of payment of three months, six months etc, for making payments in the market, which is done through cheques.

Senator Musadik Malik stated that the FBR has assumed that whole Pakistan can conduct transactions digitally. The FBR has also assumed that every person in the country has a mobile app for doing digital payments. The State Bank of Pakistan (SBP) should explain that how many companies are enabled for digital payments.

He said that the FBR has also assumed that Pakistan is digitally enabled. These are also assumptions and practically digital mode of payments cannot be implemented in the country.

Chairman of the committee Senator Talha Mehmood unanimously, rejected the FBR’s move for the corporate sector to switch over to the digital mode of payments.

The committee has cleared the proposal that the NADRA will share data with the FBR for broadening of tax base, calculating indicative income and identifying potential tax evasion.

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The committee also rejected the revised penalty regime under Section 182 (offences and penalties) under the Income Tax Ordinance, 2001.

To a question, the FBR Member Inland Revenue (Policy) said that the NADRA’s related provisions in the Tax Laws (Third Amendment) Ordinance, 2021 has nothing to do with the National Accountability Bureau (NAB). Tax Laws (Third Amendment) Ordinance, 2021 has not given any access of taxpayers’ data to NAB.

He added that an MoU between the FBR and NADRA is in process for data exchange for the purpose of the broadening the tax-base.

Responding to a query, the FBR Member Inland Revenue (Policy) stated that the amnesty scheme for the construction sector expired on June 30, 2021, but the anti-money laundering laws are still applicable.

The committee also gave approval to the sales tax zero-rating to the fat-filled milk.

The committee strongly rejected the FBR Member Inland Revenue (Policy) viewpoint that the online market place is used for supply of goods for the purpose of sales tax. The supply of goods is taxable and online market place is supply of goods, FBR member said.

The committee also approved the proposal to give legal cover to foreign remittances through Money Service Bureaus (MCBs), Exchange Companies (ECs) and Money Transfer Operators (MTOs), which would be considered as foreign exchange remitted from outside Pakistan through normal banking channels.

The committee has rejected the proposal to collect additional advance tax at the specified rates given in the Division IV of Part-IV of the First Schedule from professionals not appearing on ATL and operating from residential premises having domestic electric connections from electricity distribution companies.

The professionals included accountants, lawyers, doctors, dentists, health professionals, engineers, architects, IT professionals, tutors, trainers and other persons engaged in provision of services.

Copyright Business Recorder, 2021