Property, tobacco, retail sectors: TRC panel decides to improve taxation system

The high-powered committee of the Tax Reforms Commission under the chairmanship of Minister of State for Revenue, Muhammad Hammad Azhar Monday decided to improve the system for accurate valuation of immovable properties, expedite process of track and trace system in tobacco sector and propose mechanism for taxation of small entities engaged in the retail business.
The meeting was attended by members of the committee including: Chairman FBR Mohammad Jehanzeb Khan; Syed Masoud Naqvi, CA; Shabbar Zaidi, former finance minister Sindh; Abid H Shaban Advocate; Ashfaq Tola, FCA; FBR Member Customs Policy; FBR Member Customs Operations; FBR Member (IR-Operations); and Member (IR-Policy) FBR. Sources told Business Recorder that it was decided that the next meeting would be held in two weeks time at Karachi. The meeting discussed threadbare last minutes of meeting of the Tax Reforms Implementation Committee.
The meeting was informed that the valuation of immovable properties through valuation tables of the FBR is a temporary solution and it is not a long-term measure for assessment of such properties. Instead of changing valuations from time to time, there must be some permanent solution for valuation of properties.
The meeting was also informed that linkage is required between bank accounts and National Tax Numbers (NTNs) for broadening of the tax base.
It has been also decided to explore the possibility of effectively using National Database & Registration Authority (Nadra) data for bringing potential persons into the tax net. Sources said that the issues of broadening the tax base, utilisation of Nadra data and policy measures to increase return filers were also discussed during the meeting of the Tax Reform Commission at the FBR House.
The meeting discussed the proposal of the Tax Reforms Implementation Committee to draft a simplified return form for the small and medium enterprises. According to the officials of the FBR, the delay in the implementation of Track & Trace System in the tobacco industry is causing massive revenue loss of Rs 40-50 billion per year. The Track and Trace System is a digital solution whereby the production of goods is digitally monitored in near real time. In order to check the evasion of duty and taxes, the revenue authorities around the world are using this system.
The effectiveness of the system is a proven revenue generating measure wherever it is installed, the FBR said. The broader contours of the Track & Trace System revealed that the semi-visible security features shall be available to the wholesalers and distributors and the field formations shall be able to authenticate the genuineness of any tax stamp.
The broader contours of the Track & Trace System also revealed that the system would ensure full government control and monitoring of production lines and systematic authentication and validation of unique codes for each manufactured products. Track & Trace System would ensure systematic recognition and verification of stock keeping units and real time collection of production data and actualised consolidated transmission to the FBR.
Track & Trace system would also ensure uninterrupted and autonomous data collection on production lines and non-intrusive equipment with no impact on production speed and production capacity. Track & Trace System would ensure encrypted communication with central database, remote monitoring of tax stamps application equipment, inspection through handheld wireless electronic devices and online activation of codes.
The Tax Reforms Impleme-ntation Committee also discussed the proposed mechanism for computation of profits and gains of small entities engaged in the retail business in accordance with the 9th Schedule of the Income Tax Ordinance 2001. According to the Tax Reforms Commission, profits and gains of the retail business having a turnover of not more than Rs 5 million shall be subject to taxation under this schedule, provided that the existing tax payer meeting this criterion may also opt for taxation under this schedule. The tax shall be applied based on the flat rate as provided under the First Schedule of this Ordinance.
The taxpayer falling under this schedule shall be required to file the return of total income along with the tax payment on the due date which shall be conclusive evidence in respect of the income under this schedule. Provided that the return so filed shall be considered as deemed assessment under section 120 of the Income Tax Ordinance 2001.
The taxpayer shall deposit the tax payment as provided in the First Schedule on or before 30 September every year and non-payment shall attract a penalty of 25 percent. Further the provision of section 120 shall not apply in case of taxpayers not paying taxes on time. The taxpayer under this schedule shall be given a distinctive tax certificate by the Board to be stalled distinctively at their business.
The taxpayer shall be broadly classified in two distinct categories i.e. Rural and Urban. The tax payers in urban categories are further categorized into three categories of high, medium and local income group based on the area income capacity. In determining the income capacity of the area Board may prescribe the rules which shall inter alia include the covered area of the taxpayer.
Every taxpayer falling under 9th Schedule and who pays his due tax as per first schedule, for a period of three consecutive years, shall be granted amnesty with regard to his undisclosed wealth up to an amount equal to thirty (30) times of the tax so paid during such periods.
The retailer will be required to submit lease deed copy, rental agreement of space occupied (if any) and a copy of his CNIC along with the return, the TRC added.