Sources told Business Recorder here on Saturday that the FTO office has submitted budgetary proposals to the Ministry of Finance for consideration in the next fiscal budget (2017-18). Budgetary proposals of the FTO office focused on creation of a taxpayers integrated information system linked with CNIC/NTN, withdrawal of powers of arrests of taxpayers by the Directorate General Intelligence and Investigation Wing of Inland Revenue. The selection procedure for audit should be transparent. The parameters for selection of cases of audit should not be secret and devise in consultation with chambers and trade bodies, the FTO recommendations added.
Following are the key budget proposals of the FTO office for 2017-18:
Institutional Reforms for tax policy, collection and adjudication: To make the taxation system effective, the globally accepted principle of separation of tax policy, collection of revenue and adjudication needs to be adopted.
The FTO has recommended that the Revenue Division needs to be made functional as an independent and competent body with adequate participation of private sector. The role of the FBR may be restricted to revenue collection within the policy frame work set by the Revenue Division. The FBR should consist of the independent members instead of the FBR employees.
For providing fair and effective judicial adjudication system, departmental adjudication level and commissioner of appeals may be dispensed with and an independent National Tax Tribunal (NTT) may be constituted under the Ministry of Law or the Supreme Court of Pakistan.
The proposed NTT should consist of a judicial member (qualified to be appointed as a judge of the high court) and an accountant member. Integrated Information System for Taxation: The FBR should establish a Taxpayers Integrated Information System linked with CNIC/NTN. Every transaction involving banks, utility bills, purchase of moveable and immovable property, air travel tickets, payment of educational intuitions fees, etc, may be linked with the proposed system. At the end of year an electronic income tax statement be sent to the individual taxpayer with the amount of tax calculated for payment.
Avoidance of Coercive Measures: Arrests of taxpayers by the Intelligence and Investigation Wing of Inland Revenue are highly agitating. It is emphasised that intelligence and investigation authorities should not be allowed to negotiate amount of tax to be deposited by the taxpayers. Rather they should make the contravention reports which should be adjudicated by the adjudicating authorities, after issuing of show cause notices. The coercive measures, in terms of sections 25 & 38 of Sales Tax should not be taken, till the matter is finalised u/s 11 of Sales Tax Act, 1990, the FTO recommended.
Simplification of Rules, Procedures and Forms of Return: The rules, procedures and relevant forms pertaining to income tax should be got printed in Urdu and simplified so that the same could be understood easily by the trading community. For this purpose, taxpayers guides may be printed in Urdu by the FBR.
Selection Procedure for Audit and Record: The selection procedure for audit should be transparent. The parameters should not be secret and the chambers of commerce and industry should be taken into confidence before finalising this process.
Since the tax department already has entire information/data in their systems, during audit, they should check the said data and communicate in writing the discrepancies which need further clarification. Currently, at the time of audit, they virtually call for every book, register, voucher, bank statements to check for which, neither have they the workforce nor the competency, the FTO recommended.
Tax on Dividend and Bonus Shares: Dividend received by a person from a company is already taxed in the hands of the company. The same taxed-income is again taxed in the hands of the recipient of the same profit which is a double taxation.
Under Section 2(29) of the Income Tax Ordinance Bonus Share are taxed @ 7.5 per cent. When a company issues bonus shares, it means that the profits of the company instead of being distributed to shareholders are re-invested in the project which not only increase the output capacity of the project but also generate further employment. Section 65E gives 100 per cent tax credit on profits attributable to new equity investment in shares of a company whereas, on the other hand it taxes the expansion of a project under section 2(29) which are both contradictory.
Right of Appeal under section 122C: An assessment order passed under section 122C of the Income Tax Ordinance, 2001 (the Ordinance) is not appealable before the Commissioner (Appeals) under section 127 of the said Ordinance. While hearing complaints against the order passed u/s 122C of the Ordinance, the taxpayers have been frequently agitating that provision of barring appeal against such assessment order is against the spirit of law and fundamental rights of a citizen. Expatriate Pakistanis, making significant contribution in foreign exchange reserves, particularly suffer from the orders passed ex parte under this section by the taxation officers against them. Moreover, in some cases of taxpayers, commissioners (appeals) admit appeal for hearing whereas in some other cases, the appeals are not admitted, which is a discriminatory treatment. This provision of the Ordinance, therefore, needs to be suitably amended to allow the right of appeal against the order passed u/s I 22C of the Ordinance, the FTO budget proposals added.
Copyright Business Recorder, 2017