TAX NEWS APRIL 06, 2016

1.      FBR collects record Rs 2.1 trillion in nine months: Dar reviews performance

April 06, 2016

Federal Finance Minister Ishaq Dar held a meeting on Tuesday to review performance of Revenue Division/FBR and Finance Division in the first nine months of the current fiscal year. Haroon Akhter Khan, Special Assistant to Prime Minister on Revenue Division and secretaries of the Finance and Revenue Divisions were present during the meeting.

The meeting noted the Federal Board of Revenue has continued to display exceptional performance in the third quarter as well and has clocked an unprecedented revenue collection of over Rs 2,103 billion for the first nine months of fiscal year by recording an increase of around 19.7 percent of the revenue collected during the corresponding period of last fiscal year.

Chairman FBR, Nisar Muhammad Khan informed that impressive growth in revenue has been achieved despite a massive decrease in fuel prices, persistent recessionary trends in global economy, drop in commodity prices and low inflation. The 19.7 percent revenue growth also reflects a qualitative improvement as for the first time in many years, revenue targets have not been revised downward throughout this fiscal year and so far the revenue generation remains steady and in some areas better than initial projections.

During the quarter ending March, 2016, according to the provisional figures received so far, the FBR has made a net collection of around Rs 718 billion as against Rs 588 billion collected during third quarter of 2014-15, showing an increase of 22.1 percent. The revenue collection trend during the first nine months of the financial year, the meeting noted, augurs well for the efforts of the FBR towards achievement of the annual assigned revenue targets.

The Finance Minister commended efforts of SAPM on Revenue, Haroon Akhtar Khan, Chairman Nisar Mohammad Khan and his whole team for impressive revenue collection. He expressed the hope that FBR shall keep up its good performance in the last quarter. Secretary Finance Division, Dr Waqar Masood Khan informed that targets for Net International Reserves, Net Domestic Assets and SWAP were achieved for the third quarter and performance criteria for the quarter has been achieved. As regards other economic targets, the data for the same is being compiled, he added. The Finance Minister directed that the exercise in this regard should be completed within a week.

Details of revenue collection FY 2015-16

(Up to March):Rs in billion

===================================================

HEAD                         2014-15         2015-16       GROWTH%

===================================================

First Quarter                    538                  600              11.6%

Second Quarter               627                  785               23.8%

Third Quarter                  588                  718              22.1%

Total of three quarters  1,753              2,103               19.7%

2.      506,800 dollars recovered from Ayyan confiscated

April 06, 2016

Customs Collector (Adjudication) on Tuesday issued directives to confiscate 506,800 dollars, the money recovered from supermodel Ayyan Ali from her luggage at Benazir Bhutto International Airport Islamabad on March 14, 2015 while she was travelling to UAE. Collector of the Collectorate Customs (Adjudication) Islamabad Muhammad Ali Raza Hanjra also imposed a fine of the same amount to Ayyan Ali.

Announcing the decision, the Collector said that Ayyan Ali failed to turn up before the Collectorate for adjudication for eight months despite repeated summons, issued to her. According to reports, the Collector also imposed a fine of Rs 0.5million each to two accomplices of Ayyan Ali in the matter.

3.      PTAA urges PM to correct tax machinery

April 06, 2016

Pakistan Tax Advisors Association (PTAA) has requested Prime Minister Nawaz Sharif to correct the affairs of the tax department/appeal system and the Federal Board of Revenue (FBR) functionaries where bank accounts of the taxpayers are being attached without proper service of assessment orders and money is being retrieved from accounts without following procedure.

In a communication to the Prime Minister here on Tuesday, Javed Iqbal Qazi, Chairman, PTAA said presently bank accounts of taxpayers are being attached without proper service of assessment orders consequently money is being collected from the bank accounts of taxpayers. This state of affairs is totally against the principle of natural justice and fair play. Every Department is not facilitating the public and Public is being compelled to involve in malpractice resulting into failure of the Institutions.

Javed Iqbal Qazi claimed that FBR/Appeals authorities is imposing/charging taxes on the basis of each and every show cause notice being issued by the relevant IRO/ Assistant/ Deputy/ Additional Commissioner Inland Revenue who are creating huge demands of Income tax/sales taxes, etc, by ignoring the replies of the taxpayers. Even the settled issues are being re-opened and huge demand of taxes is being created on the one pretext or the other.

Taxpayers are not only being harassed by invoking the provisions of section 40B of the Sales Tax Act, 1990 but on the other hand the Intelligence & Investigation Department of the Federal Board of Revenue is impounding the record of the taxpayers and also lodging FIRs in this respect against taxpayers, he maintained. The Prime Minister should direct the concerned ministries that they should direct their sub-ordinate Departments to appreciate the law irrespective of the fact that FBR revenue collection targets are achieved or not.

Ministry of Finance, Ministry of Law, Justice & Human Right Affairs be directed to follow the laws of land and FBR be advised to collect tax from taxpayers which is due under the law and should not create demand of tax according to whims and desire of Ministry of Finance to achieve the revenue targets in this respect, he added.

4.      19 percent revenue growth rate reflects broad tax base: FBR

April 06, 2016

Chairman FBR, Nisar Muhammad Khan has said that Federal Board of Revenue has achieved an impressive 19% revenue growth during the first nine months of current fiscal year due to better policies and administrative measures adopted to broaden the tax base. "The revenue growth is well on track this year and we are positive about achieving the revenue collection target set for the year," he said while answering questions from participants of 104th National Management Course during their visit to FBR House here Tuesday.

Earlier, the visiting participants of NMC were given detailed briefings by Dr Muhammad Iqbal, Member SPR&S/IT FBR and Nasir Masroor Ahmad, Member Customs FBR on the working, issues, challenges and strategic vision of Inland Revenue Service and Pakistan Customs Service respectively. The Chairman said last year had been quite productive for broadening of tax base and revenue generation as FBR had been able to receive over one million tax returns which were about 750,000 three years ago. "We have taken several administrative and revenue measures, including increased cost of doing business and imposition of withholding tax on bank transactions for non-filers and dialogue with small and medium traders to improve tax compliance," he said.

To a question, he said a large number of Pakistanis were paying taxes on various accounts such as use of mobile phone and purchase of household items falling in GST regime. However, there were a large number of those who were earning a lot but not paying taxes commensurate to their income levels. "These are the people we are aiming to bring into tax net through a tax system that is simple, fair and transparent," he said.

Responding to another question about Voluntary Tax Compliance Scheme, Nisar Muhammad Khan said the scheme was launched at the behest of traders who wanted to become part of tax net to avoid paying 0.6% withholding tax on their bank transactions. "Under the scheme, we have received around 8,000 tax returns and around Rs 15 billion taxes have also been contributed through the withholding tax on bank transactions during the last seven months," he said. To another question, the Chairman said FBR had a zero tolerance policy towards corruption which was being curtailed by reducing monopoly of officers on business processes, removal of discretionary powers and enhancement of accountability at all levels. Later, Muhammad Ismael Qureshi, Rector National School of Public Policy, thanked FBR Chairman for hosting and briefing the participants of NMC. Commemorative shields were also exchanged on the occasion.

5.      PIA recovers Rs 2.9 million of 'embezzled' airport tax from its officers

April 06, 2016

Pakistan International Airlines (PIA) has recovered Rs 2.9 million from its officers, who reportedly embezzled airport tax last year; it was learnt here on Tuesday. The PIA officers, posted at Allama Iqbal International Airport (AIIAP), were allegedly involved in embezzlement of Rs 6.2 million airport tax last year. Therefore, the management of national flag carrier served explanation notices on them with the aim to provide them hearing opportunity to clarify their positions.

However, none of the officers neither gave any response to the notices nor approached PIA management to clarify their positions. Resultantly, the PIA has initiated inquiry against them. Meanwhile, PIA spokesman said that all the officers were found guilty during inquiry. He said that these officers were found involved in embezzlement of airport tax amounting to Rs 6.2 million last year hence PIA had issued notices to them in August last year and asked them to clarify their positions.

Following their negative response, the PIA has commenced recovery exercise and collected Rs 3.2 million from them last year. He further said that rest of embezzled amount - Rs 2.9 million had finally been recovered from them in March 2016. On the other hand, PIA officers levelled allegation of biasness on part of the management, saying that this action was not taken on merit. They said that notices were issued to the innocent officers and urged the authority concerned to look into the matter and take appropriate measures to resolve the issue.

6.      Budget 2016-17: PBA recommends rationalisation of tax rates

April 06, 2016

Pakistan Banks' Association (PBA) has recommended rationalisation of tax rates, particularly corporate tax, for all sectors. According to PBA's proposals for Federal Budget 2016-17, the government has taken a very positive step by gradually reducing income tax rates of the corporate sector from 35 percent to 34 percent for tax year 2014, to 33 percent for tax year 2015 and to 32 percent for tax year 2016. Since no such reduction has been given to the banking sector, the PBA has recommended that the tax rates for all sectors should be rationalised with uniformity.

The association has recommended that Section III (4) of Income Tax Ordinance 2001 be deleted and Protection of Economic Reforms Act (PERA) (1992) amended by excluding all persons resident in Pakistan, as these sections provide immunity to a tax payer on the source of amount remitted from abroad in FX through banking channels. This will help curb the practice of money whitening under the umbrella of PERA.

The PBA recommends that Section 236 P of the Income Tax Ordinance, concerning advance tax on banking transactions, other than through cash, be removed or exemption be provided to vulnerable groups. It also asked the FBR that the threshold of transfers/transactions should be increased to Rs 100,000. The PBA further recommended that unnecessary disclosures of customer information under Income Tax Ordinance 2001, sections 165 and 165 A, should be avoided and requirements under these two sections be dispensed with and law amended.

This will help increase financial inclusion in Pakistan. The PBA observed that the FBR, in violation of Constitutional provisions and Article 8 of the 7th NFC Award, is issuing notices to banks for levy of 16 percent FED on banking services, in addition to sales tax imposed by the respective provinces on the same services. As the matter has been lingering since 2011, it needs an amicable resolution, as levying of both taxes will unduly burden the citizens of Pakistan.

Through the amendment in Sales Tax Rules 2006, additional sales tax at the rate of 5 percent was imposed, over and above the sales tax of 17 percent on electricity and gas bills, on unregistered persons. Banks are registered persons, but most of its branches are rented and utility connections are in name of the landlords. It is recommended that this additional sales tax should not be charged to a bank's branch and exemption should be provided. It is also recommended that the definition of the term 'Supply' in section 2 of the Sales Tax Act, 1990, should be amended to exclude all transactions under Islamic mode of financing from the ambit of Sales tax on goods. At present, only Murabaha transactions are excluded.

The PBA says the banking sector stands ready to support the FBR in its efforts towards expanding taxation and revenue base in a fair and equitable manner and that its recommendations, if incorporated in the forthcoming Federal Budget, would help in achieving that objective.