Chairman Federal Board of Revenue (FBR) Tariq Bajwa said that the government did not violate any law for the issuance of statutory regulatory orders (SROs), as the federal government has the legal authority to revise tax rates under Income Tax Ordinance 2001, Sales Tax Act, 1990 and Federal Excise Act, 2005. Talking to media at the Parliament House here on Tuesday, Tariq Bajwa said that the FBR has adopted the correct legal course for the issuance of SROs.
The government has the right to increase or decrease tax rates through SROs under the relevant fiscal laws. However, no new tax has been imposed through SROs. The SRO 420(I)/2014, 421(I)/2014 and 422(I)/2014, all dated 04.06.2014 have been issued with the approval of the government. The revision in the tax rates can be done through the issuance of the SROs by the federal government, he added.
The new tax can only be imposed by the Parliament. However, the Parliament has authorised the federal government through legislation to revise tax rates, the FBR chairman explained. The Federal Board of Revenue is legally empowered under the relevant provisions of the Sales Tax Act, 1990 and Federal Excise Act, 2005 to issue and withdraw notifications, abolish concessionary rate of sales tax and rationalise taxes. The Federal government has delegated powers to issue and withdraw notifications under the relevant provisions of the Sales Tax Act, 1990 and the Federal Excise Act, 2005. The present notifications do not impose any new taxes.
Tariq Bajwa said that the cost of doing business has been increased for the non-compliant taxpayers through Finance Bill (2014-15). The FBR is tightening the screws around the non-filers and un-registered persons. The whole idea is to make the life of non-filers and un-documented persons difficult by increasing their cost of doing business through doubling of withholding tax rates. The return filers can claim adjustment or refunds of the advance taxes paid in their income tax returns. The doubling of the withholding taxes for non-compliant taxpayers would force the un-registered persons to come into the tax net. For example, tax paid on purchase of vehicles can be adjusted by filing of income tax returns.
When asked about the applicability of capital gains tax (CGT) on stock exchanges, FBR Senior Member Tax Policy Shahid Hussain Asad said that the scope of the CGT on securities has been expanded in budget (2014-15). During the Senate Standing Committee on Finance, Tariq Bajwa said that property taxation is a provincial subject. The federal government cannot impose taxes on property. Article 160 of the Constitution specify list of taxes to be imposed by federal government.
Responding to a query of Senator Saleem Mandviwalla on SROs, the FBR Chairman said that last year not a single tax exemption has been granted by the FBR. In 2012-13, a total of 56 exemptions were issued through SROs. The FBR has not denied that it has not issued SROs during last year, but no exemption has been granted through the SROs. The FBR itself surrendered its powers of granting exemptions through SROs. The cost of tax exemptions stood at around Rs 478 billion in 2013-14. "For the first time, we are giving real figure in view of a comprehensive study conducted on the exemptions."
Senator Osman Saifullah Khan raised a question whether the earlier figures pertaining to the cost of exemptions in the economic survey were not correct. Responding to this, the FBR Chairman said that he cannot comment on it because he was not part of the FBR in earlier years. He said that the cost of exemptions stood at Rs 478 billion in 2013-14. Under the phase-wise plan of withdrawal of tax exemptions, the FBR cannot withdraw all exemptions because of international treaties, sovereign guarantees and socially sensitive items.
The tax exemptions of around Rs 240 billion could be withdrawn through SROs. The exemptions of worth Rs 103 billion (40 per cent) have been proposed to be withdrawn in 2014-15. The remaining exemptions would be withdrawn in the next two years ie 30 per cent in each year, he added. About the broadening the tax-base, the FBR Chairman said that the government is committed to bringing 100,000 potential persons into the tax net every year. The exercise would continue for the next 4-5 years. The income tax returns have increased from 711,000 in 2012-13 to 850,000 in 2013-14.
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