There is no room for announcing any new tax amnesty scheme to legalise undeclared and undisclosed assets prior to launching of the exercise for broadening of tax base in unison with National Database and Registration Authority (Nadra).
When contacted, a senior FBR official on Wednesday dispelled the impression of any sort of amnesty scheme before initiating the enforcement exercise to bring the elite class into the tax net. The idea was discussed at different levels of the FBR, but it was not considered viable in view of the past experience of amnesty schemes to different sectors of the economy. The amnesty schemes reflect failure of the tax machinery to effectively tackle the enforcement and compliance issues amicably. Up till now, the FBR has no intention to launch amnesty scheme for legalisation of undisclosed assets. The response of the past amnesty schemes also remained unsatisfactory.
During the last amnesty scheme, the FBR collected over Rs 1.54 billion as tax from the Tax Investment Scheme (TIS) from 10,828 declarations made for legalisation of undisclosed and unexplained assets and income till December 31, 2008.
The FBR had fixed exceptionally low tax rate of 2 percent for legalisation of undisclosed assets and income against standard rate of 25 percent for individuals and 35 percent for companies. The government had allowed legalisation of undisclosed foreign currencies on payment of 2 percent tax under the Investment Tax Scheme, 2008 providing an excellent opportunity to legalise undeclared currency.
The owners of undisclosed assets and unexplained income should not wait for announcement of any new amnesty scheme and file their income tax returns to avoid provisional assessment under section 122 (c ) of the Income Tax Ordinance 2001. The provisional assessment process would actually help the persons to disclose their limited property which would be identified by the FBR on the basis of Nadra data. The FBR will ask the potential persons to file their returns on the basis of data of house, bank accounts and vehicles. Thus, they can come within the documented regime without disclosing all kinds of their properties and income. The FBR notices would be supported by documentary evidence of vehicle, house, commercial property or other immovable assets. The concerned persons would have to file their returns on the basis of such notices, which would bring them into the tax net. In this way, the process of provisional assessment would bring unregistered people into the tax net by merely filing their tax returns. If the FBR would start documentation drive with limited data, the concerned person may declare the same information for coming into the tax net.
If in response to notice under section 122 (c), a return of income is filed, then the FBR is legally entitled to amend the said order under section 122 as many times as the tax authorities wanted to do so. Thus, there is no bar on the tax department to issue only one notice of section 122 (c) of the Income Tax Ordinance 2001 to a taxpayer, sources added.