The Federal Board of Revenue has proposed some new documentation measures in budget (2012-13) ie, to bring some sectors including commercial importers operating under the Final Tax Regime (FTR) into the Minimum Tax Regime (MTR), deduction of 16 percent sales tax by registered persons on taxable supplies received from undocumented units and mandatory filing of wealth statements by all individuals from next fiscal year.
Sources told Business Recorder here on Monday that the FBR is working on new measures to bring exempted sectors in the formal tax regime with the help of enforcement and administrative measures to be taken in budget (2012-13). At present, the FBR was unable to implement the key documentation measure to collect Computerised National Identity Card numbers and National Tax Numbers (NTNs) of unregistered buyers under SRO191(I)/2011. The Board had further suspended the applicability of SRO191(I)/2011 up to May 31, 2012 and sales tax returns to be filed in June 2012 would not carry the CNICs/NTNs of the un-registered buyers.
As SRO191(I)/2011 is not practically working to obtain basic particulars of the un-registered buyers, the FBR has proposed that every registered unit would be restricted to withhold and deposit the standard rate of 16 percent sales tax on taxable supplies received from unregistered persons.
At present different sectors are operating under the FTR and pay taxes as final discharge of their tax liability. Bringing sector of the FTR into the MTR would result into documentation of economy because of the reason FBR authorities can examine the books of accounts and quantify the actual profits and gains of the taxpayers, already falling under the final tax regime. The proposed changes would result in maintenance of books of account to record each and every business transaction which would ultimately promote documentation. Secondly, such sectors to be brought from the FTR to minimum tax regime could be analysed by the Inland Revenue officials to check their actual profits recoded by the taxpayers into their books of accounts.
One of the proposals is to gradually phase-out the Presumptive Tax Regime (PTR) in a systematic manner. This could be done by increasing the rates of withholding tax on different industries/sectors operating under the PTR. In this way, taxpayer will either have to pay higher rate of withholding tax for not maintaining books of accounts or pay lower rate under normal tax regime and file income tax returns. The proposal is to encourage the people to maintain books of accounts and file their income tax returns. At present, different sectors are operating under the PTR and finally discharge their tax liabilities. For example, commercial importers are paying five percent withholding tax; exporters one percent; suppliers 3.5 percent, contractors 6 percent; commission agents 10 percent and other sectors.
These sectors are operating under final discharge of tax liability. Special treatment is being given to these sectors and they give final tax and they do not have to give any further details through income tax returns. They only file their statements of final taxation and they do not maintain books of accounts. To bring them at par with the taxpayers operating under normal tax regime through the concept of equity, the taxpayers would be given an option to operate under normal tax regime at lower rates.
Sources further said that the FBR has proposed in budget (2012-13) that every individual should file wealth statement irrespective of the income declared for the Tax Year. Under the existing law, it is mandatory for an individual earning over Rs 1 million per annum to file statement of assets and liabilities along with personal expenditure under section 116 of the Income Tax Ordinance 2001. It has been proposed that irrespective of the quantum of income declared for the tax year, every individual including salaried persons would be liable to file a statement of assets and liabilities (wealth statement).
This would be done by making appropriate amendment in the section 114 and section 116 of the Income Tax Ordinance, 2001. The mandatory filing of wealth statements by all individuals would ensure filing of assets statement maintained by each person for documentation of the economy, sources added.