1. Alleged corruption: Hyderabad Collector Customs booked
April 04,
2016
Federal Investigation Agency
(FIA) has booked Collector Customs, Hyderabad, Ahmed Mujtaba Memon, over his
alleged involvement in corruption amounting to around Rs 190 million, it was
learnt. According to the FIR, which was exclusively made available to this
paper, the case (12/2016) established against the accused on April 1, 2016, was
the result of an inquiry no 50-2015 of the FIA's Anti Corruption Circle.
The FIA alleged that the
Collector while serving in customs service remained involved in corruption and
corrupt practices.
According to the FIR, he
accumulated huge immoveable/moveable properties in his name and in the names of
other family members, which were disproportionate to his known source of
income. In addition, he made Rs 116.48 million transactions through 10
different bank accounts opened in his name and the names of other family
members.
The FIA levelled an allegation
that Memon also maintained two foreign currency accounts in his and his
spouse's names and remitted around $ 737,000 for purchasing properties in
Canada.
Moreover, the agency stated that
the accused travelled abroad on the basis of a passport obtained in his private
capacity and "concealed" properties, local and foreign bank accounts
in his annual declaration of asset. Furthermore, the FIA said that Memon also
obtained dual nationality (Canadian) without bringing the same to the knowledge
of FBR or customs department.
When contacted, Memon denied the
allegations and termed it personal vendetta by FIA. He said that he was going
to approach a court to prove his innocence in the case.
2. Arrangements being made to observe 'Tax Day'
April 04,
2016
Commissioner Rawalpindi Azmat
Mehmood has said that arrangements are being made to observe Tax Day in the
city on April 10. The commissioner, in a statement here, said that the main
function of 'Tax Day' would be held at Lahore and participants from Rawalpindi
would participate through video link in it. Banners would be displayed in the
city to highlight the importance of taxation on services, he added.
3. KP governor extends Customs Act 1969 to Malakand Division, Kohistan
April 03,
2016
The Khyber Pakhtunkhwa governor,
Iqbal Zafar Jhagra has extended Customs Act 1969 to all districts of Malakand
division and Kohistan district. The governor extended the Customs Act with the
permission of the President Mamnoon Hussain. The Home and tribal affairs
department of the KP has issued notification in this regard. The copies of the
notification have been sent to Peshawar High court, High court Mingora Bench,
commissioner Malakand division and deputy commissioners of all districts.
After merger of Swat state into
Pakistan, the area was exempted from Customs. Now the Income Tax department
would set up its office in Malakand division. Meanwhile, the non-customs paid
vehicles dealers have strongly condemned the government's decision and said
that there is no industry in the area and government wanted to deprive the
people of their only source of income. Talking to this scribe, they demanded
amnesty scheme for the dealers.
Pakistan People's Party
provincial general secretary, Engr Muhammad Hamayun Khan termed the imposition
of taxes on Malakand division as unjust step and condemned it. He said the
government attitude towards KP highly disappointing, saying that people of
Malakand division, had rendered homeless for sack of peace in the country, and
faced with earthquake, and floods, due to which they are still unstable and
unrest, he said. Hamayun said the sacrifices rendered by people of Malakand
division could not avoidable and unmatchable. He said if the government didn't
do for welfare of people, then it should not also put burden of terrorism and
poverty stricken people of KP. PPP leader said the government had made promise
to waive off the loans, but the committee didn't honour. He warned that if the
government was failed to withdraw customs Act and taxes on Malakand division,
the party would strongly agitate across the province.
4. Reasons behind decrease in effective rate of sales tax identified
April 03,
2016
The effective rate of sales tax
is within the range of 3 to 3.5 percent as compared to the standard rate of 17
percent sales tax due to massive tax evasion and illegal/inadmissible input tax
adjustment claimed by the unscrupulous elements. Official sources told Business
Recorder here on Saturday that the illegal input tax adjustment was one of
the major reasons responsible for decrease in the effective rate of sales tax.
In view of the standard rate of 17 percent sales tax, the effective rate of
sales tax is very low. At one time in the past, the effective rate of sales tax
went upto 7-8 percent. Later, the rate again came down.
They added that the efforts were
needed to plug in loopholes in the sales tax system for improving effective
rate of sales tax. Official stated that the effective rate of sales tax was
around 3 to 3.5 percent as compared to the statutory rate of sales tax. In its
final report, the Tax Reform Commission (TRC) has mentioned that the effective
rate of sales tax during 2013-14 was 3.9 percent for sales tax (domestic) and
10.7 percent for sales tax (imports).
TRC said the four federal taxes,
ie, Income and Corporate Taxes, Sales Tax (Domestic and on Imports), Federal
Excise Duties, Customs Duties are levied on different tax bases. The statutory
tax rates are applicable as per relevant tax laws of these taxes. However
because of variety of reasons, including tax exemptions, concessions, tax
fraud, and less-than-satisfactory tax administration (including corruption),
the effective tax rates diverge from statutory rates. Hence, there is room for
improvement. This note provides a comparative assessment of effective and
statutory tax rates for fiscal year 2013-14. The effective tax rates are
calculated as collection of tax relative to its base. It may be added that the
relevant data has been obtained from official sources of FBR and GOP.
The most serious problem appears
to be in the area of sales tax, especially its domestic component where the
divergence between effective and statutory rates is much larger compared to
other taxes. The sectors which are either tax exempt or lowly taxed are
wholesale and retail trade, transportation, hotels and restaurants, and an
array of other activities categorised as informal sector activities. Similarly,
the effective rate of income and corporate taxes is on the lower side mainly
due to tax evasion and avoidance and low compliance of the corporate sector.
The weakness of tax administration is far too obvious as the number of business
activities that have not been properly taxed is seriously high. This can be
readily verified from analyzing the returns. The number of corporations showing
nil income and business losses is increasing at a fast pace. The recent
reliance on withholding tax structure rather than self-assessment is a clear
reflection of poor tax administration, TRC added.
5. Government committed to introducing market value-based real estate tax
April 02,
2016
Pakistan has committed to
introducing a market value-based real estate tax. This was disclosed in the
International Monetary Fund staff report titled Tenth Review under the Extended
Arrangement and Request for Modification of Performance. Federal Board of Revenue
(FBR) plans to work with the provinces to build a centralised fiscal cadastre
to introduce market value-based real estate tax.
The staff report further
acknowledges that in spite of authorities'' commitment to raise the tax to GDP
ratio to 14.5 per cent in the medium term (by 2019-20) remains highly pertinent
but despite progress under the programme revenue remains much too low to allow
for sustained increases in infrastructure investment and social spending. To
achieve this objective the FBR will further streamline tax concessions and
exemptions, except for goods with social priority, well-targeted export
incentives, and those related to bilateral trade agreements and international
conventions.
The report further adds that to
improve fairness of the tax system and mitigate economic distortions,
additional revenue should be raised mainly by widening the tax net while
avoiding tax amnesty schemes. The staff review further warns the authorities to
ensure that the voluntary tax compliance scheme (VTCS) for traders does not
alter the level playing field for all taxpayers and that the scheme does not
discriminate against law-abiding taxpayers.
Tax authorities are also
committed further streamlining tax concessions and exemptions, modernising the
GST on goods and services in close co-ordination with provincial revenue
authorities and begin publishing the stock of outstanding tax refund claims and
stepping up the processing of general sales tax (GST) refunds; in addition FBR
is planning to accelerate the implementation of risk-based auditing, including
the initiation of income tax audits for high net worth individuals, ensure data
matching between domestic taxes and customs to identify noncompliant taxpayers
and minimise under-declarations, the staff review adds.
The government has further
assured the IMF that it would continue to take governance and anti-corruption
measures at the FBR, including by establishing communications platforms to
facilitate public reporting of corrupt practices in tax administration, seek
parliamentary ratification of the legislation against "benami"
transactions and establish a tax policy research and analysis unit which is
defined as assets that can be used to conceal one''s assets and evade taxes.
Specific priorities of FBR would
include continued removal of GST and customs duty concessions and exemptions,
improving taxpayer compliance, and encouraging better tax collection at the
provincial level by rebalancing the existing fiscal federalism system and
reducing fragmentation in tax administration.
FBR plans to further expand the
coverage of tax crimes under the Anti-Money Laundering (AML) Act, including
income tax-related crimes. As authorisation for the government to amend the
schedule of tax crimes is already granted under the existing AML Act, the
authorities do not plan to make further legal amendments but rather to amend
the schedule of the AML Act, by notification in the Federal Gazette, to include
offences under the income tax law as predicate offences to money laundering.
The Pakistani authorities have
committed to continue strengthening the effectiveness of the AML/CFT framework
in line with international standards by bolstering the Financial Monitoring
Unit''s analytical capability and strengthening the effective implementation of
relevant United Nations Security Council Resolutions to freeze the assets of
terrorist individuals and organisations, staff report added.
Memorandum of Economic and
Financial highlights the government determination to create the much-needed fiscal
space for priority spending on infrastructure, education, healthcare, and
targeted social assistance to improve living standards and to protect the most
vulnerable segments of society.
The government refrained from
granting any new tax concessions and exemptions and did not issue concessional
Statutory Regulatory Orders (SROs), except under exceptional circumstances.
Furthermore, parliament approved the legislation permanently restricting the
government''s authority to grant tax concessions or exemptions. Such
concessions and exemptions are now in the purview of parliament, except in a
number of specified exceptional circumstances, in which the Economic
Co-ordination Committee (ECC) of the cabinet can grant them on a temporary
basis.
The authorities committed to
continue to supporting growth-friendly tax revenue mobilisation. While
tax-to-GDP ratio has been steadily raised, it still remains low and tax
authorities continue to see great scope to increase tax revenue by broadening
the tax base, strengthening tax administration, and shifting the tax
composition from indirect to direct taxes in an efficient and equitable way.
The government committed to
protecting the integrity of the General Sales Tax (GST) regime and improving
its policy design and administration. It has also decided to modernise the GST
on goods and services in close co-ordination with provincial revenue
authorities before the FY 2016/17 budget is presented to parliament. The
objective is to address the bottlenecks and distortions in policy design and
administration of the GST system. To this end, the FBR will simplify the GST
regime by adopting a single standard rate and introducing a number of base
broadening measures.
The government committed to
accelerating tax administration reforms to improve compliance and enforcement,
critical to realise the revenue potential. The FBR will continue to strengthen
the culture of taxation by aggressively pursuing tax evaders, avoiding tax
amnesty schemes, and adopting a program of comprehensive reform of the tax
institutions. The FBR will further improve enforcement efforts on non-filers
who have the potential to contribute at least the average tax paid by currently
registered taxpayers and especially large corporations and high wealth
individuals.
The FBR now requires all
government suppliers to be on the current list of active income and GST
taxpayers to conduct business with government departments. The FBR will also
ensure data matching between domestic taxes and customs to identify noncompliant
taxpayers and minimise under-declarations.
The FBR will streamline the
online filing scheme (which will facilitate registration and filing of PIT
returns by simplifying the tax return form) and maintain the coverage of tax
audits at 7.5 percent of filed tax returns. In addition, as part of its
communication strategy aimed to enhance transparency, the FBR will start
regularly publishing aggregate information on tax crime prosecutions (ie,
cases, convictions, custodial sentences, reparation orders and court fines) by
end-March 2016. A tax policy research and analysis unit under the Revenue
Division by end June 2016 will be established to improve analytical capacity
for fiscal policymaking.
The government has established an
integrity management unit in the FBR and collected asset declarations of all
FBR employees, and further strengthened the integrity management unit by
identifying potential processes within the FBR that could reinforce its
anti-corruption structures, including in the Directorate General of Internal
Audit (DGIA). Next steps in this agenda include using the DGIA reports
regarding tax fraud for identification of complicit tax officials and
developing key performance indicators, a code of conduct, transparent criteria
for integrity management, and ethics training.
In addition, the FBR has started
monitoring the penalties imposed by its field officers. The FBR will continue
working towards simplifying tax laws and procedures and better co-ordinate with
provinces to consolidate collection of provincial taxes and fees to make it
easier for taxpayers to meet their obligations and at the same time eliminate
opportunities for corruption by limiting the discretion of tax officials. The
FBR will also expand the IRIS (an end-to-end integrated IT system) to all
business areas throughout the FBR''s network of offices to further reduce
discretion in tax administration. Following the recent ratification of the
whistleblower law for tax crimes, by end-April 2016 the FBR will establish
communication platforms (phone hotline and website) to facilitate public
reporting of corrupt practices in tax administration (new structural
benchmark). After gaining initial experience with these new platforms, the
government committed to publishing aggregate results of their usage and
subsequent investigation.
6. WHT on bank transactions Notification
April 02,
2016
The Federal Board of Revenue
(FBR) has notified that the reduced rate of 0.4 percent withholding tax on
banking transactions of non-filers shall continue till extended date of April
30, 2016. According to a notification issued by the FBR here on Friday, in
exercise of powers conferred by proviso under Division XXI Part IV of the First
Schedule to the Income Tax Ordinance, 2001, the Federal Government has directed
that in its notification No SRO.216(I)/2016 dated 15th March, 2016, the
following amendments shall be made namely.
In the aforesaid notification,
for the words "sixteenth day of March, 2016 to thirty first day of March
2016" the words "first day of April, 2016 to thirtieth day of April,
2016" shall be substituted.
7. Godowns containing smuggled goods sealed in Quetta
April 02,
2016
The customs department sealed
three godowns with smuggled good worth millions during crackdowns here on
Friday. The customs department officials' team raided three godowns in Kachlak
area of the provincial capital Quetta. Smuggled goods including smuggled tyres,
thousands of meters of cloth, generators and cigarettes stated to be worth more
than 80 million were recovered and godowns were sealed. However, no arrest
could be made as the culprits and people deployed to guard the godowns managed
to escape prior getting the information of the raids.
The recovered goods were taken
into custody by custom department and the police after registering cases
against the owners of godowns have started raids for their arrest.
8. FBR: IMF underscores need for removing corruption, eliminating mis-governance
April 02,
2016
The international Monetary Fund
(IMF) has said that Pakistan needs to continue against corruption and
mis-governance in Federal Board of Revenue (FBR) to increase tax to GDP ratio.
Responding to media persons question through conference call from Washington,
IMF mission chief Herald Finger said that "we have been discussing various
measures with the authorities to broaden the tax base and increase the tax to
GDP ratio to 14.5 per cent for 2019-20.
He added that discussion with
Pakistani authorities focused on modernisation of property tax to make it
market based in co-ordination with the provinces as well as issues in custom
duty to manage under invoicing. He said that discussion on whether Pakistan
needs another IMF program or repayment of EFF loan would take place when the
ongoing program would reach close to it. He also highlighted that decline in
exports; security issues as well as appreciation of exchange rate are major
challenges for the country. Additionally, he said that financial market
internationally might have negative impact on Pakistan.
He also hoped that the ongoing
dialogue will continue with various stakeholders to develop consensus on
restructuring and privatizations of public sector enterprises he added that GDP
growth would be around 4.5 per cent for the current fiscal year and stated that
IP gas pipeline would benefit both the countries. He said that changes in
fiscal responsibility and debt limitation act are important reforms that will
reduce the debt gradually.
Finger said FBR tax collection
for March 2016 reflects that it is close to the indicative target and tax to
GDP ratio which was 10 per cent two years ago is expected to increase to 12.2
per cent in the current fiscal year. Finger said that next review of the EFF
would be in the early May 2016 and discussion would focus on withdrawal of tax
exemptions in the next fiscal year budget. He said that Pakistan's real
effective exchange rate is overvalued and needs to be market based to benefit
the country's export.
9. Lahore RTO-II surpasses collection target
April 02,
2016
Regional Tax Office-II, in Lahore
has surpassed a revenue collection target assigned by the Federal Board of
Revenue for this March under the heads of Income and Sales Taxes and Federal
Excise Duty. Office-II sources told Business Recorder on Friday that it
had collected up to Rs 4,000 million against the target of Rs 3,977 million
under the head of Income Tax, Rs 3,001 million against the target of Rs 2,939
million as sales tax and collected another Rs 26 million under the Federal
Excise Duty against the target of Rs 17 million assigned to it.
The office has been able to
achieve growth of 28 percent, 32 percent and 100 percent under the said three
heads of taxes as compared to the collection made during March 2015 and for the
first time collected more than Rs 7 Billion during any month of a financial
year. Khawaja Adnan Zahir, the Chief Commissioner of the Inland Revenue at the
Regional Tax Office-II, is leading his team since he joined the office on
February 8. It also emerged that the office had carried raids in 92 cases up to
March 2016 resulting in default detection of Rs 686 million, a cash recovery of
Rs 181 million and reduction in illegally claimed carry forward by Rs 505
million.
10. 21st MCMC participants visit FBR House
April 02,
2016
A group of 25 senior civil
servants undergoing the 21st MID-CAREER Management Course (MCMC), along with
the faculty members of the National Institute of Management (NIM) Karachi
visited FBR House, here on Friday. The group was welcomed by Nadeem Dar, Member
Facilitation & Taxpayers' Education (FATE). He briefed the visiting
officers and faculty of MCMC about the organisational structure, working and
revenue collection performance of the FBR.
He also highlighted the
challenges faced by the FBR and the way forward to resolve these issues.
Tehmina Aamer, Chief FATE, in her comments, gave a detailed outline of the
various policy and operational challenges faced by the FBR and highlighted the
strategies adopted by the FBR to address these issues. She also discussed the
major initiatives of the FBR to enhance revenue generation through audit and
enforcement initiatives and efforts broaden the tax base.
She highlighted the measures
being adopted by the FBR to improve the tax to the GDP and bridge the tax gap.
The briefing was followed by a detailed Questions & Answers session. The
MCMC participants freely asked questions which were candidly and frankly
responded to by member FATE Nadeem Dar and Chief Admn Dr Tariq Ghani. At the
end of the Q&A session, the National Institute of Management (NIM) Karachi
Chief Instructor Khawaja Shaukat and Shagufta Waris (ADS-Coord) thanked the FBR
for providing the participants of MCMC with an opportunity to interact with the
FBR's top management and to understand the grass-root issues facing the
country's economy and the revenue collection system. Appreciating the
performance of the FBR, he said that it is the need of the hour to adopt and
promote tax culture at every level of the society. Member Fate Nadeem Dar and
NIM Chief Instructor Khawaja Shaukat exchanged institutional mementos.
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