The Chairman of Federal Board of Revenue (FBR), Sohail Ahmed, has said that the government will amend tax laws to ensure transfer of property only after payment of 4 percent capital value tax (CVT) for strict compliance and enforcement in 2009-10.
On the conclusion of post-budget press conference at the Planning Commission here on Sunday, the FBR Chairman told reporters that the 4 percent CVT on property was a kind of capital gain tax (CGT) on real estate. "Even 2 percent CVT had not been properly collected at the provincial level. There is a need of legal backing to ensure payment of CVT before property transfer," he added.
He said that to tackle the situation, the government is planning to bring a new law so that property would not be transferred till CVT payment has been made by the concerned buyer. The property transaction would not be considered legal till due amount of CVT has been paid in the national kitty, he added.
Responding to a query, he said that tax reform was a complex issue, and administrative restructuring would continue under the reform agenda. The main pillar of the reforms is integration of taxes. This would be instrumental in exchange of data to verify payments made by the taxpayers in sales tax and income tax departments, he said.
He said that taxation measures to the tune of Rs 69-70 billion had been taken in the 2009-10 budget. He said that the customs computerised clearance system would be upgraded. However, the FBR would also enhance its capacity to indigenously implement own systems. "If we improve our capacity, the FBR would not be dependent on foreign customs clearance systems," he added.
He further said that the policy of audit has been changed in view of alleged complaints of harassment. Previously, audit was conducted for past 4-5 years' period, which was contested by the business community. Now, it has been decided that audit would be carried out for the past one year.
In case any major discrepancy is detected, or there is mismatching of data, the department has the legal authority to scrutinise record for the past years. The FBR would select 4-5 percent of total cases under computerised audit system for verification of data. In this regard, the FBR has also asked the chambers and federation to voluntarily come forward and point out cases of tax evasion. However, audit would be done in a transparent manner, without causing any harassment to the taxpayers, he added.
He said that FBR would also hire external tax auditors, from Institute of Chartered Accountants of Pakistan (ICAP) for conducting third-party audit. About a question, Sohail said that income tax demands to the tune of Rs 40 billion had been raised through proper checking and verification.
He said that the government is taking serious steps to check the menace of under-invoicing. In this connection, the Ministry of Finance has assigned the task to FBR Member, Customs, to examine WTO laws for controlling under-invoicing at the import stage. He said that under-invoicing has been taking place on imports from 4-5 countries, including China; Malaysia, European countries, etc.
He said that the level of under-invoicing could be judged from the fact that there was huge variation in data on dutiable imports from China as compared to actual duty paid in Pakistan. He said that the Directorate-General of Intelligence and Investigation, Income Tax, would be empowered to take information of income tax payers from other departments.
When asked about enforcement measures on the sales tax side, a senior FBR official said that the government has enhanced powers of sales tax officials to register FIRs against those registered persons who would obstruct tax officials during physical monitoring of manufacturing, sales and clearance processes at their business premises.
In this regard, the Federal Board of Revenue (FBR) has amended Sales Tax Act, 1990 through Finance Bill 2009 to impose fine of Rs 25,000 or 100 percent of the tax amount involved, whichever is higher. Upon conviction, the person may face imprisonment up to five years, or fine equal to loss of tax involved, or both.
He said that the section 40-B of the Sales Tax Act, 1990 empowers the FBR to depute sales tax officials at business premises to monitor sales and clearances of the registered units.
However, sales tax officials are not legally empowered to punish registered persons, who obstruct sales tax officials in performing their official duties. In certain cases, registered units refuse to give access to the sales tax officials for monitoring purposes.
In such cases, tax officials have no legal authority to take any remedial action against owners of units, deliberately creating hurdles in enforcement of the section 40-B under Sales Tax Act, 1990. He shall, further be liable, upon conviction by a Special Judge, to imprisonment, or with fine which may extend to an amount equal to the amount of tax involved, or with both.