Haroon Akhtar Khan, Special Assistant to Prime Minister on Revenue has said the government is actively working on a new scheme to issue bonds in lieu of pending refunds to the taxpayers particularly exporters. Speaking at Aaj News program 'Paisa Bolta Hai' with Anjum Ibrahim, he said that the new scheme of issuing bonds against the payable refunds is being materialised.
He said that Finance Minister Ishaq Dar has announced that all refunds below Rs 50 lakh would be paid by the deadline of March 15, 2016.
Prime Minister Nawaz Sharif has already announced sales tax zero-rating for the export sectors. There is a big progress on account of payment of pending refunds to the exporters.
Haroon Akhtar said that the FBR has witnessed growth of over 19 percent during the first six months of 2015-16. The growth in revenue is going up in 2015-16. The upward trend of revenue collection has also been witnessed in January 2015 and February 2016. In January 23 percent and February 25 percent growth has been seen in revenue collection. The positive trend in revenue collection reflected that something is right in methodology of collecting taxes.
He explained that the government has specially assigned him to appoint tax officials whose integrity is unquestionable and they can deliver the results. Top officials have been selected across the country and a massive drive has been launched to increase the revenue collection and broaden the tax-base. As a result of these measures, both the direct and indirect taxes are increasing in 2015-16. Sales tax collection has also been increased by controlling sales tax evasion.
He maintained that a good administrative change has taken place in FBR. Tax officials have realised that there is no favourite of anyone in the FBR. We have brought the new team on merit and the message is very clear that tax officials, who would deliver, would be rewarded but those not delivering results would be sidelined.
He said that the tax officials who would perform satisfactory would be awarded, but there is no room for tax officials who would not achieve the assigned revenue collection targets.
He said that the misconceptions about collection of indirect taxes need to be removed. Sales tax is an indirect tax and more efforts are required to collect sales tax as compared to direct taxes. Sales tax has to be collected on monthly basis for the whole financial year. Extra efforts are being made by the tax machinery to collect the sales tax during the whole fiscal year. Sales tax did not automatically deposited in the kitty but hard work is required to do so. The same is the case with the withholding tax collection. The monitoring of the withholding agents is a difficult task to ensure that all amount of deducted tax has been timely deposited. The FBR has effectively checked pilferage in customs duty collection through enforcement at the import stage. The efforts of officials of Inland Revenue Service (IRS) are visible in collection of customs duty, withholding tax and sales tax.
Responding to a question on imposing 35 percent tax on non-filers, Haroon Akhtar Khan said that at present there is a normal tax regime and second is the special tax regime under Schedule Nine of the Voluntary Tax Compliance Scheme (VTCS). The government has taken a very big step to register non-filer traders and document actual income of old filers. If someone do not avail benefits of the VTCS, he would be taxed under the normal tax regime. In case of normal tax law, there is no immunity from audit, no exemption from sales tax registration which is mandatory and no exemption from becoming withholding tax agent. After expiry of scheme, the FBR will collect 0.6 percent withholding tax on banking transactions of non-filers. The undeclared income of non-filers would be subjected to 35 percent tax and 100 percent penalty where source of income is not declared. The traders would have to opt for the VTCS or pay tax under the normal tax regime.
Tax lawyer Waheed Shahzad Butt responded that how can tax at the rate of 35% be imposed on incomes falling in a lower slab? As per law this rate of 35% is applicable to individual if his taxable income exceeds Rs 6 Million. How this blanket rate of 35% can be applied to a person having income less than Rs 400, 000/.
All persons using commercial or industrial electricity connections are paying advance income tax under Section 235 and in the case of individuals and AOP an amount up to Rs 36,000 is treated as minimum tax with no refund option, tax lawyer said.
Haroon Akhtar Khan said that the VTCS has focused small traders, who are already insisting that the tax return form should only contain 2 columns. However, we can go up to the tax rate of 30-35 percent on traders under normal tax law.
To a query, he said that it is unfair to say that only 100 returns have been filed under the VTCS, as only 20 days have been passed since launching of the scheme. There are still 7-8 days left in expiry of the VTCS. People have tendency to file return on the last date of the scheme. It is expected that positive response would be seen during last days of the scheme.
It is unfortunate that the mindset of the taxpayers is that they do not want to pay any taxes. Despite concessions and schemes, taxpayers are not ready to pay the due amount of taxes in the national exchequer. We have to change the mindset of the taxpayers. People are paying 50-60 percent taxes in USAA, UK, Canada and other countries. Ultimately people have to pay taxes and there is no other way out, Haroon Akhtar added.
Special Assistant to PM on Revenue admitted that the trader is annually paying Rs 36,000, but he is not filing income tax return. Therefore, we are trying to convince trader to file tax return and discounts have been offered to him under VTCS. We are offering 0.2 percent minimum tax on turnover basis instead of one percent tax. Traders would be exempted from audit and notices. They can avail the facility of minimum turnover tax of 0.2 percent.
Waheed Shahzad Butt stated that such kinds of schemes cannot be successful till the in build amnesty in the section 111(4) of the Income Tax Ordinance 2001 has been removed. This lifetime amnesty is available to foreign remittances where the tax authorities cannot question source of investment.
Tax lawyer said nearly 60 million Pakistanis, subjected to more than 50 kinds of withholding taxes under the Income Tax Ordinance, 2001 (both adjustable and non-adjustable), contributed nearly 65 percent of total direct tax collection
As per FBR record only 1 million filed income tax returns it was assumed as if only they "are the taxpayers" but quite surprisingly reality is that almost 60 million pay advance income tax despite the fact that majority of them is not enjoying taxable income which is Rs 400,001 because up to Rs 400,000 there is no tax and it remained below taxable limit, Waheed Shahzad Butt added.
Tax lawyer said that the withholding tax provisions should not be allowed to treated as performance of IRS functionaries and their performance should be evaluated by considering direct recoveries made after contravention reports/ audit etc. All taxes collected though withholding tax provisions should be evaluated in the hands of WHT Directorate, already working separately in the IRS hierarchy.
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