After finance act, 2004, I was trying to convince my employer regarding his apprehensions about taxes. I said, "Now the Government has made almost every effort to facilitate the taxpayer in the payment of taxes."
He replied. "We are sweating to earn the money through our business and in future the commissioners will not be sweating in collecting the taxes because they have got LTU, MTU and STU air-conditioned on the premise that we will further sweat to pay taxes."
He continued, "In order to increase the profits and deposits of NBP we are required to submit the tax payment challan and sales tax return in NBP only and not in any other bank."
He further showed his emotions by telling the fact, "the government is not bothered that we are employing staff merely to do their working under the name taxation department within a commercial organisation and the obligation keeps on increasing under the name of presumptive tax regime/WHT agents."
I was just thinking about the queries for an appropriate answer. He suddenly told me, "Have you ever given deep thought over the taxation?" I immediately replied, "Yes". He unexpectedly brought a question paper which is as follows.
DEEP THOUGHTS ON TAXES:
1. Have you ever wondered why people refuse to share their age until they get an extra deduction on their tax return?
2. How come we never hear of a government tax auditor, commissioner or collector being audited?
3. If you live in a state of chaos do you need to pay taxes?
4. Do you think a fair tax structure is one that allows everybody to cheat evenly?
5. Is the lottery a tax on people who are bad at math?
6. Isn't it really disheartening to know that all the taxes you've paid over your lifetime are spent by your government in less than a second?
7. Isn't the only difference between tax avoidance and evasion about 21 years - Income Tax Ordinance, 2001 and Income Tax Ordinance, 1979?
8. CBR only allows entertainment expenses if it is for business. If it's business then it's not entertainment. Are they trying to tell us something?
9. Sure the wages of sin is death but don't you think that by the time the taxes are taken out it's just sort of a tired run-down feeling?
10. When trying to calculate your adjusted gross income for tax purposes why is it that no matter how you adjust it its still gross?
11. When you do a good deed should you get a receipt just in case heaven is like the CBR?
12. Why do local governments spend our tax dollars filling in potholes and then spend even more putting speed bumps on the roads they just fixed in order to slow traffic down? If the objective is to slow traffic down why don't they just leave the potholes?
13. Why do they call it a tax return if they have no intention of returning any of it?
14. Why does a slight tax increase cost you two thousand and a substantial tax cut only save you fifty rupees?
15. Why does it take more brainpower to fill out the income tax forms than it does to earn the income in the first place?
16. Why does the Government Employees pay taxes? Doesn't the money go to the government which in turn is in the service of the Government Employees? Is this what is called self-employment?
17. Why doesn't the CBR offer us our money back if we're not satisfied?
18. Why is it that when you get a pay raise it's just large enough to increase your taxes yet small enough to have no effect on your take home pay?
19. Do you think people should pay taxes on what they think their worth?
I understood the questions and immediately replied, "This is the extract of questions which I was unable to answer during the interview".
He said, "That's why you have been appointed". Do you know what happened at the last post-budget seminar? I said, "No". At the last post-budget seminar the income tax commissioner asked the audience which sort of taxation they found fairest. There was a pause, and then I was the only person who replied the question. I was astonished.
He said, "I raised hand and replied the wealth tax". "But the wealth tax was repealed," replied the commissioner. "Ay-ah, that's what I like about it."
I was just digesting the out of the blue answer to the commissioner but before this he asked me, "Do you know the case We deliver?" I immediately said, "No". At that time, I was the owner of a small shop and was being questioned by an ITO [currently Taxation officer - TO] about my tax return. I had reported a net profit of 80,000 for the year.
"Why don't you people leave me alone?" I said. "I work like a dog, everyone in my family helps out, and the place is only closed three days a year. And you want to know how I made 80,000?" "It's not your income that bothers us," the ITO said. "It's these deductions. You listed six trips to Islamabad from Karachi for you and your wife."
"Oh, that," I said smiling. "I forgot to tell you - we also deliver and my wife is working as a delivery person but I have to watch her performance."
He further said, "I am not satisfied with the American approach of spending the aids to CBR, Russian approach is the best". I asked, "Sir, what is the difference between the two?" He said, "Do you know, when NASA first started sending up astronauts, they quickly discovered that ball-point pens would not work in zero gravity. To combat this problem, NASA scientists spent a decade and $12 billion, developing a pen that writes in zero gravity, upside down, underwater, on almost any surface, including glass and at temperatures ranging from below freezing to over 300° C. However, the Russians use a pencil."
I understood the psycho of the boss and now have a firm commitment to change his mindset. I said, "Have you analysed the latest amendments brought by the budget in the Income Tax Ordinance, 2001 and Sales Tax Act, 1990". "Yes", he replied abruptly. "Should I explain it to you one by one", he insisted. I was wondering that if he grasped that well then what I was doing over here. "Ok, see my commentary", he said.
AMALGAMATION: Available to banking companies, non-banking finance company and insurance companies because rest of the sectors do not need this as per CBR.
WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS: Concept of "to the extent the expenditure is incurred in deriving income from business chargeable to tax" is now inapplicable in claiming deduction of expenditure and is replaced with expenditure must be incurred wholly and exclusively for the purpose of business because the commissioners are finding it impractical to apply it and tax professionals are not understanding that there is no difference between the two.
SINGLE CASH PAYMENT LIMIT - RS 10, 000: The single cash payment limit has been increased to Rs10, 000.00 without any basis, for instance SPI, CPI etc, except the discretion of CBR and may need change in future when the CBR thinks it fit.
EXEMPTIONS AND TAX PROVISIONS IN OTHER LAWS: Amended the section because CBR would not like to do the work of digging out the exemptions, tax credits, rebates etc in other laws and calculate the impact over the economy.
The CBR would like to give relief to the holding companies on ancient accounting basis, that is, a single entry. How can we call it group relief if only subsidiary can transfer its losses, isn't it holding company relief.
REVISION BY COMMISSIONER: Now the commissioner is authorised to suo motto [at discretion automatically] call for any record in respect of an assessment for revision - what is the difference between assessment under section 61 & 62 of Income Tax Ordinance, 1979 and this revision? Is there any change.
APPEAL TO COMMISSIONER: The mandatory payment is abolished but who will compel the assessing commissioner to not ask for irregular assessment demand. Who will say to the commissioners that please give your decision within the time period?
ALTERNATE DISPUTE RESOLUTION: Pay the cost, feel the pinch but still at the discretion of the CBR
INDUSTRIAL UNDERTAKING - IMPORT: Definition is only meant for withholding at import stage, for rest of the ordinance use ordinary dictionary.
SALARY: Employer can only adjust mobile/telephone and motor vehicle not due to any tax credit and deduction. The employees earning more than Rs 600, 000 only pay the rent and do not incur any conveyance expense.
PAYMENT TO NON-RESIDENT: The commissioner's order for deduction is final like a king and the order is not appealable.
CBR AS BANKER OF GOVERNMENT INSTEAD OF SBP: Keep the money for the cost of 6% and unpaid should earn interest income @12%.
AUDIT: CBR can deliberately override the judgements of the Supreme Court regarding open policy affecting general public by amending the law. The inside story is how to avoid getting audited. Number one; don't list deductions that will raise a red flag. Number two; make sure you file on time. Number three; don't make any stupid anti-CBR speech at the talk shows on TV or on article like that of Mohammed Ashraf!
CBR, PTR OR WHT: Who is collecting the money for the government?
SALES TAX ACT: Which sections do not contain the words "as notified by the CBR in official gazette"?
No sooner I was shaking my head after reading my boss's commentary, he said, "Do you know the presumptions of CBR even in the children's minds. "No", I said. He said, "A little boy needed Rs100 very badly and his mother told him to pray to God for it. He prayed and prayed for two weeks, but nothing turned up. Then he decided to write a letter to God requesting Rs 100.
When the postal authorities received the letter addressed to God, they opened it up, and decided to send it to government authorities. The government authorities asked for the opinion of CBR if we pay that boy, it will be an allowable charitable donation or not.
One of the personnel at CBR was so impressed that he instructed his secretary to send the little boy Rs5. He thought this would appear to be a lot of money to a little boy.
The little boy was delighted with the Rs5 and sat down to write a thank-you letter to God which reads as follows: "Dear God, Thank You so very much for sending me the money. I noticed you sent it through the CBR, Islamabad. As usual they deducted WHT!
He is about to talk to me about the inadmissible deductions but I excused him for the washroom and immediately came out from the room. Now I learnt two things there are always two sides of the mirror and never firm over your commitment to make people belief.
(The writer is international tax adviser)