Returns by non-filers: FTO asks FBR to devise mechanism through SECP input

The Federal Tax Ombudsman (FTO) has recommended the Federal Board of Revenue (FBR) to devise a mechanism in consultation with the Securities and Exchange Commission of Pakistan (SECP) for filing of income tax returns by the non-filer business entities registered with the SECP.
According to the annual report of the FTO for 2019, a number of recommendations covering areas including training, accountability, incentivised promotions and transfers policy etc were sent to the FBR.
Recommendations were made for need-based training to cater for updated professional knowledge and skills, as well as service-oriented attitude of tax collectors. Evolving Key Performance Indicators (KPIs) for functionaries, need of integrity check and linking those parameters to posting, promotion, training abroad, reward and punishment were recommended.
Need for across-the-board internal accountability on maladministration was emphasized.
In order to encourage increase in filing of returns by employees of government and autonomous bodies, it was recommended that the FBR approach the concerned authorities/Establishment Division to issue instructions to heads of government departments, autonomous bodies and large-scale public sector organisations for obtaining certificate of filing of returns by their employees falling in the tax net, at the end of last date of filing of returns, and link their promotions/increments to filing of returns. It was also suggested to devise mechanism in consultation with the SECP to ensure that business entities registered with the SECP, who were non-filers, must file income tax returns regularly. Recommendation was also sent to the FBR that instead of extending the last date for filing of returns, late filing be allowed with certain penalty per month or any part of it, as it would be a more revenue-pro measure, the FTO said. It was also recommended that proper assistance to the return filers be provided through establishment of facilitation centres at convenient places, the FTO recommended.
A major problem in filing of income tax returns was its complexity, language barrier and mode of filing, especially for small taxpayers.
This office recommended the need for simplification of returns in consultation with small taxpayers and making available the option of filing the returns in Urdu. Similarly, an option to file the returns manually was also recommended with facility of uploading scanned images and punching of data by the functionaries of the respective circles.
Desk and sectoral audits to supplement audit with scrutiny of transactions and activities mentioned in returns of filers in desk audit was emphasized.
Apart from the real estate sector; retail, wholesale and transport sectors were also recommended to be focused by defining parameters for their volumes of business and subjecting them to tax in a transparent manner.
To discourage tax avoidance by specific industries, special sectoral audits of major industries with standard SOPs for audit was recommended by the FTO.
The FTO Office recommended that some systemic issues of malpractice in tax administration regarding suspicious and fraudulent registration of ghost entities was identified.
The issues were analysed; causes highlighted and appropriate recommendations sent to the FBR. It was recommended that in order to combat menace of dummy/Benami commercial imports, physical verification of all major commercial importers, especially the non-corporate entities should be conducted.
Stringent check at the time of registration as commercial importer also needed to be put in place. The FTO office recommended introducing a regime of gradual increase in penalty for repeated contraventions on importers, for not placing the invoice in the containers.
It also recommended modifying the scheme of tax exemption available to formerly FATA/PATA areas of KP, to be made applicable on the basis of business activity in that area, instead of business activity of domicile holder of those areas and also recommended widening the scope of definition of "persons" responsible to collect advance/adjustable tax and the CVT (to the extent of ICT) to cover all internal transfers of property, which were either not placed before the registrar of properties or reported to the concerned tax offices, or transfer fee charged by the management was not declared to tax authorities.
The FBR should provide mechanism for immediate disabling of the registration in electronic system, pending final deregistration, as soon as the application for de-registration was received from a registered person. The FBR should provide time limit in federal excise law for issuance of show-cause notice on seizure of counterfeit cigarettes or beverage and conveyance carrying the seized goods and powers of appellate authorities did not include jurisdiction over order of blacklisting issued under Section 21 of the Sales Tax Act, 1990.
It was recommended that the order of blacklisting should also be made an appealable order.
Moreover, since the law prescribed that in case show cause notice was not issued within seven days of the order of suspension of registration, the said order of suspension shall become void ab-initio.
Therefore, it was recommended that the commissioner should issue the formal orders of revocation of suspension, if the show cause notice was not issued within the prescribed time, the FTO added.