ISLAMABAD: The Tax Laws (Amendment) Bill, 2024 is likely to be challenged in courts due to the imposition of restrictions on economic transactions of non-filers, which is a violation of the fundamental rights of citizens.
Former Member Inland Revenue (Policy) Dr Muhammad Iqbal told Business Recorder that the bill has extended extraordinary powers to the tax department to enforce tax laws.
The proposed enforcement measures may result in increasing the number of return filers, but it will not be able to bridge the gap or revenue shortfall.
Tax Laws (Amendment) Bill, 2024: comments
Another tax expert and Chairman Reforms and Resource Mobilisation Committee informed that there are serious constitutional issues in the proposed Tax Laws (Amendment) Bill, 2024. How the government can impose any kind of restrictions or limits on specific transactions to penalise non-filers. The said bill is expected to be challenged in courts, he added.
The bill allows punitive penalties including sealing businesses and seizing assets, suspending bank accounts which would be definitely challenged in courts. The restrictions being placed on various transactions may be challenged on the basis of being violative of the fundamental constitutional rights, Dr Iqbal stated.
Former Member Inland Revenue (Policy) said that Tax Laws (Amendment) Bill, 2024, has imposed restrictions on economic transactions of ineligible persons (non-filers) including purchase of motor vehicles, buying/ selling of immovable properties, sale of securities and ban on opening of new bank accounts.
Dr Muhammad Iqbal said that the restrictions on purchase and sale of vehicles and immovable property will further depress economic activity.
Former Member FBR apprehended that the imposition of ban on opening of new bank accounts of non-filers might increase share of illegal cash economy.
There are strong apprehensions of misuse of the facility of allowing family members of filer to carry out financial transactions. The bill allows a taxpayer to acquire a vehicle, or property, or engage in financial transactions in the names of family members who match his claimed cash and assets.
The bill empowers Federal Board of Revenue (FBR) officials not to allow registration or access to other associated legal documents for purchase or transfer of immoveable property (whose value will be notified), sale of securities including debt securities or units of mutual funds.
A leading tax expert has apprehended that the restrictions on financial transactions of non-filers under “Tax Laws (Amendment) Bill, 2024” would violate Articles 18 (Freedom of trade, business or profession), and Article 23 (Provision as to property) of the Constitution.
The commentary of Tola Associates, and Tola & Tola on “Tax Laws (Amendment) Bill, 2024” revealed that filing of sources of investment and expenditure statement is against the self-assessment scheme under Income Tax Ordinance. Therefore, it may be held to be ultra vires the ITO by the courts of law in Pakistan.
Tax expert opined that the Section 175AA may violate Article 14 of the Constitution, as it breaches the taxpayer’s right of privacy. Further, no degree of variance has been specified in Section 175AA (1) (b). As such, the FBR may obligate the bank to share particulars of the taxpayer even if there is the slightest degree of variance. The same seems arbitrary and
Referring to new Section 14AE of the Sales Tax Act, 1990 to authorise the Chief Commissioner to seal the business premises; seize movable property or appoint a receiver for the management of the taxable activity of a person.
The department already has the powers of compulsorily registering a person who does not get himself registered for sales tax. If a person does not register himself voluntarily, he should be registered compulsorily instead of taking the above coercive steps.
Dr Iqbal added that appointment of experts and auditors from the private sector means an admission that the FBR’s staff is not capable of the task of audit and investigation. Instead of improving their capacity, outsourcing the job will further damage their capacity. Outsourcing of income tax audit in the past has badly failed.
Copyright Business Recorder, 2024
Comments
Comments are closed.