There is no provision in federal tax laws, including Sales Tax Act, Income Tax Ordinance and Federal Excise Act, which permits any kind of agreements/consensus between Regional Tax Offices (RTOs) and taxpayers to reduce their tax liability or recovery of detected amount of tax evaded, etc, through a mutual agreement.
Senior FBR officials told Business Recorder here on Thursday that due or admissible tax could be paid in installments only after determination of tax liability by the commissioner only subject to payment of default/late surcharge on late payment of tax. However, there is no provision in the tax laws to reduce tax liability through any kind of agreement or arrangement between the RTO and the taxpayer, top tax officials added.
A tax expert said that no doubt some discretion is also available in certain laws which should also be exercised judiciously. However, in all the tax laws, provisions on making agreement with the taxpayer to reduce his tax liability are non-existent. The tax expert pointed out that there are many law-abiding taxpayers in the country who pay their full tax liabilities and such agreements are promoting not only tax evasion but also discrimination.
A member of Tax Reform Commission (TRC) said that only court can permit or allow any kind of agreement for settlement of tax related issues between department and taxpayers. Meanwhile, the FBR (HQs) has taken notice of a case where Regional Tax Office (RTO) Rawalpindi has unearthed a major case of tax evasion of Rs 4.1 billion committed by a leading cosmetic manufacture, but the RTO and the company reportedly reached an agreement to pay only Rs 100 million and that too in installments spanning over a period of seventy months.
The FBR has also called a report from the RTO Rawalpindi on such agreement and contravention report but till date no directive has been passed by FBR (HQs) to undo the invalid agreement and take measures for recovery of due taxes. Any agreement is valid only when it is enforceable by law. Since tax laws do not provide for making agreement with taxpayer; therefore, even if an agreement has been reached out, it is void as it cannot be enforced by law. Interestingly the reported agreement reached out between RTO Rawalpindi and the said cosmetic company does not mention any provision of law under which it has been signed.