ISLAMABAD: The Federal Cabinet meeting presided over by the Prime Minister on Wednesday approved amendments to various tax laws for launching a new amnesty scheme with a view to bringing non-filers into the tax net. The Cabinet meeting was informed that a significant segment of Pakistan's economy is undocumented and the growing size of the underground economy is not only depriving the exchequer but is also hindering economic planning and development.
The meeting decided to give approval to amendment to Customs Act 1969, Sales Tax Act 1990, Income Tax Ordinance Act 2001 and Federal Excise Act 2005 to register non-filers for bringing them into the tax net. The Cabinet also discussed and accorded approval to the proposed amendment to Foreign Exchange Regulation Act, 1947 (FERA, 1947) and the Land Surveying and Mapping Bill- 2012.
The necessity to amend the tax laws became more urgent, when the Cabinet was informed that a large number of businesses and individuals who are regularly filing their income tax returns are avoiding their legal obligation by either under-declaring or not correctly declaring their assets or income while on the other hand, a large number of businesses and individuals who are required to be registered with the Federal Board of Revenue and to regularly file their income tax returns are also avoiding their legal obligations.
The FBR along with Nadra have collected data about the multiple bank accounts, travels, assets and other details of these non-filers. Based on this data two tax incentive schemes are being proposed by FBR. The past attempts by FBR to register them failed as the FBR field units unfortunately compromised the data. The Cabinet was informed that the Tax Registration Enforcement Initiative, 2012 will be administered through banks along with Nadra under the proposed section 120B of Income Tax Ordinance 2001 to register and bring into tax net the non-filers of tax returns.
A fixed tax is proposed and provides cover to undeclared income/assets up to Rs 5 million. The Cabinet was informed that the Investment Tax Scheme, 2012 is being proposed to be enacted under authority given in the section 120A of Income Tax Ordinance 2001, which will attempt through 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 Rs 5 million by payment of token tax and additional assets/income by payment of Investment tax as per proposed slab.
The scheme will be administered through establishing special counters with the help of Banks and Nadra. The Secretary, Revenue Division informed the Cabinet that both the schemes may not be taken as a safety net for those who have not complied with tax laws but as a trampoline which will provide buoyancy to the national economy and deepen and broaden the tax base.
The 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. These schemes have been fine-tuned based on discussions and feedback from tax bar associations and trade bodies and the field units. It is also planned to launch an organised awareness campaign to bring it to the notice of the potential declarants. It is also proposed to provide an effective alternative dispute resolution mechanism in all tax laws to settle the protracted legal disputes. The proposed schemes are likely to enlist 1.3 million new taxpayers, the Cabinet was informed.
The Cabinet accorded ex-post facto approval to start negotiations and signing of the Memorandum of Understanding (MoU) between the Foreign Service Academy of Pakistan and the Diplomatic Academy of Chile. The Cabinet also considered and approved the Election Laws (Amendment) Bill, 2012.
In order to avoid any legal complication of important terrorism cases under trial, the Cabinet gave approval, subject to vetting by the Ministries of Law and Human Rights, the Juvenile Justice System (Amendment) Bill, 2012. Necessary provisions have been incorporated for the protection of witnesses and juvenile accused in the proposed bill.
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