The Federal Cabinet which, is scheduled to meet on Wednesday (today), is expected to give its approval to two tax incentive schemes - Tax Registration Enforcement Initiative, 2012 and Investment Tax Scheme, 2012 - of the Federal Board of Revenue (FBR) for documentation of economy and legalisation of un-disclosed assets along with income/expenditure.
Sources told Business Recorder here on Tuesday that the Federal Cabinet is also expected to accord immunity to persons availing these schemes from the National Accountability Ordinance, 1999, Federal Investigation Agency Act, 1974, Companies Ordinance 1984 and Foreign Exchange Ordinance, 2002. In this connection, the FBR has finalised the proposal for placing it before the Federal Cabinet.
According to sources, a significant segment of country''s economy is undocumented. The growing size of the underground economy is not only depriving the national exchequer of its due share but is also profoundly hindering economic planning and development. A large number of businesses and individuals who are regularly filing their income tax returns are avoiding their legal obligations by either under-declaring or not correctly declaring their assets and income. On the other hand, a large number of businesses and individuals who are required to be registered with the FBR and to regularly file their income tax returns are avoiding their legal obligations.
According to sources, the FBR and Nadra have data of multiple bank accounts, travels, assets and other details of these non-filers. Based on this data, two tax incentive schemes are being proposed by the FBR. Previous attempts made aimed at registering them failed as FBR''s field units unfortunately compromised data.
Sources said the Tax Registration Enforcement Initiative, 2012 had been devised to make an attempt through a simple scheme which would be administered through banks along with Nadra under proposed section 120B of Income Tax Ordinance 2001 to register and bring into tax net non-filers of tax returns. A fixed tax is proposed and provides cover to undeclared income/assets upto Rs 5 million.
Sources also said the Investment Tax Scheme, 2012, was being proposed to be enacted under an authority stipulated by the section 120A of Income Tax Ordinance 2001, which would spell out a simple scheme to provide a mechanism and cover to regular filers in addition to non-filers of income tax returns to declare undeclared income assets/expenditure up to the value of Rs 5 million by payment of a token tax and additional assets/income by payment of investment tax as per proposed slab. The scheme would be administered through establishing special counters with the help of banks along with Nadra, sources added.
Both the schemes must not be taken as a safety net for those who have not complied with tax laws but will provide buoyancy to the national economy and deepen and broaden the tax base. Persons availing the schemes shall also have immunity under the National Accountability Ordinance, 1999, Federal Investigation Agency Act, 1974, Companies Ordinance 1984 and Foreign Exchange Ordinance, 2002, according to sources. Based on discussions and feedbacks from tax bar associations and trade bodies and the field units, these schemes had been fine-tuned, the sources said and added that the success of the schemes was heavily dependent upon its successful publicity. "Accordingly, it is planned to launch an organised campaign to bring it to the notice of the potential declarants and field units will also be assigned defined targets to publicise the scheme and enroll the declarants," sources said.
According to sources, up to five percent of the tax revenue through these schemes is proposed for expenditure on the publicity and advertisement for the launch of schemes, in accordance with prescribed procedure of Press Information Department (PID) and the Federal Government and 1.5% of the revenue receipts from the Tax Registration Scheme is proposed as share of the National Database Registration Authority (NADRA).
Sources said it was also proposed to provide an effective alternative dispute resolution mechanism in all tax laws to settle protracted legal disputes, sources said. The proposed amendments in the Customs Act, 1969, Sales Tax Act, 1990, Income Tax Ordinance 2001 and Federal Excise Act, 2005 to take effect immediately can be made by the National Assembly through a Money Bill to be called Finance (Amendment) Bill 2012. Approval of the Cabinet is solicited for the proposal for submission of the Finance (Amendment) Bill 2012 before the National Assembly, according to sources.
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