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Taxation
Federal Board of Revenue (FBR) has observed that it is now the prerogative of the Parliament to approve, amend or repeal the Assets Declaration Ordinance, 2019 (ADO, 2019). The FBR has submitted its response to the Lahore High Court (LHC) on a writ petition challenging tax amnesty scheme introduced under Assets Declaration Ordinance, 2019 (ADO, 2019).

Earlier, the LHC has issued notices to the Federal Government, Ministry of Finance, Ministry of Law, Speaker, National Assembly and Chairman FBR on a petition filed by tax lawyer Waheed Shahzad Butt, challenging the ADO, 2019.

The petitioner has argued that there is another financial “National Reconciliation Ordinance” under the umbrella of ‘ADO, 2019′ recently promulgated by the President through an ordinance in terms of Article 89 of the Constitution. The FBR submitted it reply and states “Assets declaration ordinance is a onetime incentive scheme offered by the government and promulgated through Presidential Ordinance, where non-documented sectors of economy have been encouraged to get themselves documented. Hence the petitioner’ contention of labelling the impugned scheme as an NRO is not tenable, the FBR’s comments to the court said.

The petitioner states, “Introducing Amnesty Scheme for tax dodgers is simply nothing but one step forward and two steps back. Another clean chit to break the net for the untaxed and under-taxed businesses / persons / taxpayers and severe violation of Constitution.Through present petition the petitioner questions the promulgation of ordinance in terms of Article 89 of the Constitution titled as ‘Assets Declaration Ordinance, 2019’ by undermining the authority of the Parliament. The scheme is contrary to the constitutional rights provided by the Constitution to all the Citizens of Pakistan including taxpayer citizens, the petitioner said.

The FBR states before the LHC that “The Constitution of Pakistan itself makes allowance for promulgation of a law though an Ordinance, under compelling circumstance. It is now the prerogative of the Parliament to approve, amend or repeal it. Reply on behalf of respondent no. 4 (FBR), has been filed, however, the same is still awaited on behalf of the remaining respondents. Learned Law Officer wants to seek instructions in the matter, LHC ordered.
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Taxation
The Federal Board of Revenue (FBR) has proposed enhanced values of immovable properties in 18 cities except Karachi and Quetta. According to the FBR, the Board intends to revise the value of immovable properties in various cities of Pakistan from July 1, 2019. The proposed draft of valuation tables for various cities is hereby placed for the stakeholders for views and comments which may be provided not later than 30th June 2019 at email address secy.itb@fbr.gov.pk.

The new revised rates are intended to be applicable from 1st July 2019. ccording to the proposed valuation tables issued by the FBR, values has been proposed to be increased on properties located in Islamabad, Abbottabad, Lahore, Bahawalpur, Faisalabad, Peshawar, Rawalpindi, Multan, Mardan, Jhang, Gujrat, Sukkur, Gujranwala, Hyderabad, Sialkot, Sargodha, Sahiwal and Jhelum. At present, the Board has issued valuation tables of immovable properties in 21 major cities wherein such properties are valued at a value higher than the DC rates.

The purchasers are also required to pay 3% tax on the difference between the DC value and FBR value of property to explain the source of investment to the extent of differential between FBR value and DC value. The rates notified by the Board are still considerably lower than actual market value. It is therefore intended that FBR rates of immovable properties would be taken closer to or about 85% of actual market value, FBR added.
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Taxation
Over 13000 luxurious vehicles having engine capacity 2400cc and above are owned by unregistered persons (non-filers) in Karachi. Chief Commissioner, Regional Tax Office (RTO)-II, Badaruddin Ahmad Qureshi, disclosed this at a press conference on Assets Declaration Scheme, 2019, held at RTO building, here on Thursday.

“However, situation for non-filers has been changed since Benami Act being implemented from February 2019 and Federal Board of Revenue (FBR) has now acquired details of 150000 undeclared foreign assets under Automated Exchange of Information (AEIO),” he said. 

RTO-II chief commissioner further said that the government, through Assets Declaration Scheme 2019, has provided last opportunity to the non-filers to declare all undisclosed assets by June 30, 2019 against nominal tax while they can pay that nominal tax till June 2020.

Answering a question, he categorically ruled out the possibility of extension in the last date of Assets Declaration Scheme 2019 i.e. June 30, 2019. He noted IMF program to be commenced from July 1, 2019 and the Fund was deadly against amnesty scheme; hence there was no change of any extension in the last date for declaring undeclared assets. 

Furthermore, Qureshi said that the board had also established the database of all potential taxpayers (non-filers) and massive crackdown against the persons who did not avail the scheme, would be kicked off after end of the amnesty scheme.

Qureshi said the punishment of concealment of foreign or benami assets was seven-year imprisonment and 200 percent penalty. He cited that the FBR, which was presently working on establishing offshore assets directory, announced 5 percent reward of tax recovery for whistleblowers. “In order to maintain confidentiality, government did not give access to the chief commissioners regarding the assets’ declaration details,” he said.

Jaffer Raza, commissioner RTO-II, Sanaullah additional commissioner, Salauddin, deputy commissioner, Zeeshan Merchant, former vice president KTBA and others were also present on the occasion.

Needless to mention, the notices on the basis of bank accounts, industrial and commercial power connections, houses of two kanals and above, luxury vehicles of 2400cc and above and foreign travels are being issued to the non-filers, persuading them to avail amnesty scheme and declare unreported income, sales and moveable and immoveable assets on or before June 30, 2019 to avoid confiscation and imprisonment up to seven years.
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Taxation
The information of five to six million people, specifically non-filers of income tax returns, would be available on the web-portal of the Federal Board of Revenue (FBR) from Friday (today) and non-filers can have online access details of their assets to verify data compiled by the FBR from different authentic sources. This has been stated by FBR Member Inland Revenue Policy Hamid Atiq to the Senate Standing Committee on Finance here at Parliament House on Thursday during review of the Finance Bill 2019.

The FBR Member Inland Revenue Policy said that the FBR is going to give online access of information of assets available with its database to the concerned persons. The information of non-filers on its website on Friday (June 21) will contain data of assets in the name of non-filers and would be accessible by the concerned persons by using computerised national identity card (CNIC) numbers.

The FBR and the NADRA are finalising the arrangements in this regard. FBR Member Inland Revenue Policy Hamid Atiq told the Senate Standing Committee on Finance that the non-filers can now access details of assets in their names. However, information on the FBR website could only be accessed by the concerned persons giving their user names/CNIC, etc.

The FBR Member Inland Revenue Policy said that the FBR has estimated that 10 percent of the population is in a position to pay taxes. This means that around 7-8 million people would be able to pay taxes. The FBR is planning to double the number of non-filers from existing 2 million to 4 million. These 4 million persons should be solid filers and should pay at least some taxes along with their returns.
When committee members asked about the FRB capacity, the FBR Member said that the organisation has a workforce of 20,000 employees. “We have double revenue after every five years, but we are always in bad books of people,” he added.

Chairman Senate Standing Committee on Finance Senator Farooq H Naek recommended the National Assembly to discontinue with the practice of the Federal Board of Revenue (FBR) for annually publishing Tax Directories particularly of parliamentarians. All committee members endorsed the viewpoint of Senator Naek and asked the NA to discontinue the said practice.

The issue came to the light when FBR Member Inland Revenue Policy Hamid Atiq stated that the FBR has overruled the secrecy laws to publish the tax directory. On this, the chairman Senate Standing Committee on Finance stated that tax directory should not be published by the FBR. “The publication of the tax directory is against the concept of the confidentially and privacy of the taxpayers. Therefore, this practice of publication should discontinue,” Naek said.

However, those parliamentarians who are not paying any taxes should be highlighted, the chairman committee said. The senators were of the view that cases of kidnappings in the country have increased due to publication of the details including tax payments of the parliamentarians and taxpayers paying huge amounts of taxes. Even banking secrecy has been compromised.

Naek further said that even the secrecy of the accountholders available under the banking laws has been ended. Responding to this, the FBR Member said that the withholding tax information of non-filers has been obtained from the FBR. If the Swiss banks are ready to provide information to the FBR, the local banks have not objected in providing the information. The FBR and the banks have exchanged data and confidentiality of the accountholders has been secured. The FBR Member added that the FBR has obtained information of accountholders from 17 banks.
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Taxation
The Federal Board of Revenue (FBR) is seeking powers under the Finance Bill 2019 to conduct audit of income tax affairs of banks, examine their accounts/ records and conduct inquiry into their expenditure, income, assets and liabilities. This has been stated by a senior FBR official while briefing the Senate Standing Committee on Finance here at the Parliament House on Thursday. FBR Member Inland Revenue (Policy) Dr Hamid Ateeq Sarwar informed the committee that the FBR is empowered to conduct audit of banks. A few banks went into litigation that the FBR cannot audit their income tax affairs, as banks are covered under a special schedule of the Income Tax ordinance 2001.

To deal with the issue an “explanation” has been added to the Income Tax Ordinance 2001. Referring to the explanation, FBR Member Inland Revenue (Policy) said that it is clarified that nothing contained in this Schedule shall be so construed as to restrict power of Commissioner, while conducting audit of the income tax affairs under section 177, to call for record or such other information and documents as he may deem appropriate in order to examine accounts and records to conduct enquiry into expenditure, income, assets and liabilities of a banking company and all provisions of this Ordinance shall be applicable accordingly, he added.

To a query, Dr Hamid Ateeq said that the agriculture is a provincial subject. However, the FBR can collect agricultural income tax on behalf of the provinces provided the provinces authorise the FBR to collect the tax.
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Taxation
Khyber Pakhtunkhwa Revenue Authority (KPRA) has been given a tax collection target of Rs 20 billion for financial year 2019-20. The authority is highly optimistic about the achievement of the target. Since establishment the authority has collected revenue of over Rs 50 billion. As a first phase of legal framework reforms, descriptions and classifications of the First and Second Schedules of the KP Finance Act, 2013 have been rationalized in accordance with the best international practices.

Different trade bodies and associations have been suggesting and requesting for reduction in tax rates keeping in view the peculiarities of the KP market. Keeping such demands in view, tax rate on several classes and categories of services reduced to 10%, 8%, 5% and 2%.

Several categories of informal sector or traditional small-size businesses have been exempted from sales tax. The relief measures included tax rate on middle class restaurants (other than corporate, chain-based, franchised or run by multinationals) has been reduced from 15% to 8%. The rate has been further reduced to 2% on restaurants operating purely in informal manner or style. Similarly, Tax rate on services of wedding halls has been reduced from 15% to 8%. Rate on catering services has also been cut down to 10%.While full exemption has been granted to traditional type launderers and dry-cleaners, tax rate on medium sized stand-alone laundries and dry-cleaning businesses has been reduced from 15% to 8%.

Tax rate on advertisements on electronic media has been reduced from 15% to 10% and in case of print media advertisements, it has been further reduced to 5%.

Tax rate on property dealers, second hand automobile dealers and dealers of second hand goods, rent-a-car businesses has been reduced from 15% to 5%.

While tax rate on industrial workshops and authorized dealership workshops has been reduced from 15% to 10%, it has been further reduced to 5% on all other categories of workshops. Tax rate on toll manufacturing or contract manufacturing has been further reduced from 10% to 5%. Contract printing of text books meant for free distribution by or through the government has been granted full exemption from sales tax.
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Taxation
Minister for State on Revenue Hammad Azhar said Wednesday that the government would not extend the last date of amnesty scheme i.e. June 30, 2019 due to international obligations. He informed the Senate Standing Committee on Finance, “We have international obligations and will not be able to extend the tax amnesty scheme beyond June 30, 2019.” The Assets Declaration Ordinance 2019 has been laid down in the Senate and it has been made part of the Finance Bill 2019. After passage of the Bill, it would be part of the Finance Act 2019.

The FBR officials informed that from July 1, 2019, the FBR will launch action against 50 biggest defaulters/tax evaders in 10 major cities. Under the drive, the action would be initiated against five big defaulters/evaders from each big city.To a query of a builder association for waiver of penalty/surcharge on late filing of returns, Hammad Azhar said that the waiver of penalty/surcharge would not be applicable for late filers. The Senate Committee accepted the recommendation that the advance tax being collected from the subscribers of mobile phones should be withdrawn.
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Taxation
The government is likely to impose 17% GST and 5% income tax in the electricity bills which, coupled with Rs 1.5 per kWh increase in tariff, would have devastating effect on the industrial growth including the exporting industry where zero rating facility would be withdrawn from July 01, 2019.

It may be noted that the non-exporting industry is not eligible for refund of the GST which would have a dire impact on its growth. So much so, about 40 percent production of exporting industry is also being sold in domestic market which would have to suffer like other non-exporting industry. The power sector experts have apprehended that any such situation would devastate the industry by and large.

Sources in the ministry have pointed out that the government would notify increase of Rs 1.5 per kWh tariff after passage of the budget from the Parliament. If the government imposes GST on the industry, tariff would shoot up to the extent that it would have devastating effect on the industrial growth. Some 17% GST and 55% income tax would be added to the tariff which has been raised by the government by Rs 1.5 per kWh. It may be noted that the industry has already been heavily burdened with tariff and imposition of taxes would make it further burdensome. Already, the Discos passed on line losses to the industrial feeders which was a big source of irritation for the industrial consumers.
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Taxation
The Federal Board of Revenue (FBR) announced Monday that all banks have cooperated with the FBR and provided necessary information of the account holders to the tax authorities. According to the FBR, Chairman FBR Shabbar Zaidi has thanked all banks for providing necessary information to the FBR. Sources said that the FBR is analysing the data provided by the banks.

During the last meeting between the CFOs of banks and FBR, the FBR had requested the banks to pursue their customers/account holders to avail the Assets Declaration Scheme-2019 in cases where the accountholders have balance of Rs 500,000 as on April 30, 2019 and the account has not been declared with the tax department.

It was decided that in first phase the banks will provide the data of withholding taxes with effect from January 1, 2018 onwards with CNICs of the withholdees to FBR by June 17, 2019. In this regard, data of all the withholding sections will be provided by the banks and the representatives of the banks agreed with the timelines.
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Taxation
The second session of Post Budget Conference 2019 held at a local hotel, which covered the topic of indirect taxation with main speaker Asim Zulfiqar Ali, FCA. Rana Muhammad Usman Khan moderated the session while the panelists included Naeem Akhtar Sheikh, FCA, Rafqat Hussain, FCA, Ejaz Hussain Rathore, FCA and Muhammad Raza, FCA.

In his presentation, Asim Zulfiqar Ali, FCA spoke in length about the amendments proposed in Sales Tax and Federal Excise Duty.

He said the general rate has been kept at 17 percent. However, certain steps have been proposed for documenting the economy and strengthening of tax structure.

He said the proposed amendments also aim to consolidate the special procedures governing various sectors in the main law as well as eliminate the culture of issuance of notifications/ Sales Tax General Orders.

Regarding the cottage industry, he said the proposed amendments are conceptually rational; however, limit of annual turnover of less than Rs 2 million would create enforcement issues.

Sales Tax to be charged on Retail Price of certain imported goods. This concept/practice is currently applicable under FED for imported cigarettes and this could be followed.On ‘Value of Supply’ for toll manufacturing, he said dispute/controversy with provincial sales tax is still unresolved. Honorable Lahore High Court has already referred the matter to both authorities for appropriate resolution.

Presently, he said, withholding provisions are contained in Sales Tax Special Procedure (Withholding) Rules, 2007. The Bill proposes to insert Eleventh Schedule prescribing the rates of withholding tax by specified withholding agents in manner and mode to be prescribed by the Board. Certain provisions contained in the Rules excluding a number of sectors/persons from applicability of withholding sales tax provisions have however not been incorporated in the Schedule, he added.

He said it is proposed to omit restrictions related to audit once in every three years.

He further proposed power of the Board to specify goods subject to zero rating through a general order in certain cases is proposed to be withdrawn.
According to him, power of Federal Government to issue notifications in following matters is proposed to be transferred to the Board (with the approval of the Minister-in-charge)

This presentation was followed a panel discussion and Q&A session.
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