TUESDAY NOVEMBER 13: Major proposed tax initiative approved by Prime Minister

ISLAMABAD: Prime Minister Raja Pervez Ashraf on Monday gave his approval to proposed 'Tax Registration and Enforce-ment Initiative' aimed at documenting over 3.8 million potential individuals, who belong to rich class but are out of tax net. Sources told Business Recorder here on Monday that the 'Tax Registration and Enforcement Initiative' would be placed before the Cabinet, which is expected to meet on Wednesday (November 14), for its early submission to the Parliament.
Appreciating the FBR initiative, the PM commented that had the idea of the registration scheme been materialised two years back, country's economy would have been in a better shape. "We still have enough time for implementation of scheme, which would be instrumental in raising tax-to-GDP ratio, expanding the tax-base and raising revenue for the government," sources quoted the PM as telling the FBR team.
The PM has also directed Ministry of Finance and FBR to prepare a formal summary and put the scheme before the Federal Cabinet for approval. Following approval of the 'Tax Registration and Enforcement Initiative' by the Cabinet, the scheme would be presented before the National Assembly for formal approval. According to sources, Finance Amendment Bill-2012 will seek powers to authorise the FBR for making registration scheme and protection to the persons availing the scheme from other laws such as National Accountability Ordinance-1999 and Foreign Exchange Manual 2002 etc.
The Prime Minister, however, raised two basic questions about the scheme before giving his approval to it. Tax authorities promptly responded to the queries of the PM and explained the legal and technical implications of the scheme. The PM asked how people would be encouraged to declare their assets and pay taxes under new scheme if they believed that there would be a new amnest6y scheme after every five years. The FBR Chairman responded that previously schemes were not backed by authentic database and details of expenditure.
Schemes were not targeting potential persons on the basis of authentic information whereas now the proper data was available for a targeted action against persons, who would not avail the scheme. Moreover, previously action was taken on the basis of income of a person, which was a time-consuming process and now action would be taken on the basis of expenditures made by individuals. On the basis of expenditures, the Board could easily determine their income for taking targeted action against potential individuals. The scheme would also give targeted punishment to persons who would not avail the scheme.
The PM also raised another question: How FBR would address the concerns of individuals about their harassment at the hands of taxmen if they declared their entire assets for availing amnesty under the scheme. Tax authorities responded that the FBR would move a Bill in the Parliament for amendment in rules to give legal backing to all features of the proposed scheme. In the past, no amnesty scheme was rolled back. The Parliament would give its approval to the scheme and there was no question of its rolling-back. Thus, no questions would be raised about the declarations made under the scheme due to legal protection available to them.
According to sources, the scheme had been approved in broader terms by the Prime Minister and now the final details of the scheme would be modified on Tuesday for its presentation before the Cabinet on Wednesday. During the meeting, the FBR told that the blocking of the CNICs should not affect the basic rights of the citizens. An FBR official responded that the citizens' basic rights would not be suspended as only services of un-documented persons not availing the scheme would be suspended.
Chairman FBR Ali Arshad Hakeem informed the meeting that tax collection had doubled since 2008 from Rs 1 trillion to Rs 2 trillion this year. Moreover, there had been an increase of 22% in the tax revenues this year as compared to the last year. The Prime Minister said that the self respect of the tax payers should be protected and a taxation structure aimed at enhancing revenue base should be streamlined in a manner where culture of voluntary tax payment was promoted. The PM further said that a large segment of Pakistan's economy had been operating informally, depriving the national exchequer of its due share and acting as a hindrance towards economic planning and development.
The Prime Minister said that demand for cars, luxury goods and housing reflected the availability of wealth in the country. Unfortunately, however, country's tax base was not commensurate with this phenomenon, he regretted. The Prime Minister asked the FBR to plug leakage of taxes and bring elite groups of the society into the tax net.
The meeting was attended by Dr Abdul Hafeez Shaikh Minister for Finance, Syed Naveed Qamar Minister for Defence, Syed Khursheed Ahmed Shah Minister for Religious Affairs, Farooq H. Naek Minister for Law, Dr Nadeem ul Haq Deputy Chairman Planning Commission and senior officials. The FBR officials included FBR Chairman Ali Arshad Hakeem, Senior FBR Member Tax Policy Asrar Raouf and FBR Member Inland Revenue Ijaz Hussain Shah.