He said that the government was bypassing the Federal Board of Revenue (FBR) for issuing voluntary tax compliance scheme for a specific group of people, traders, who do not trust FBR.
"There is a lack of relationship between the tax collecting agency and taxpayers. The VTCS clearly reflects that the government wants to do something different from the prevailing tax system in the country. In this context, the existing tax system need to be analysed to ascertain the reasons that why the system is not effectively working in Pakistan," he added.
"In FBR, there are issues of tax policy, tax rates and tax administration. As compared to international tax agencies, the image of FBR is not very good which needs to be improved. The issue of corruption in tax machinery needs to be addressed on urgent basis. The question arises here as to why the system is so complicated that nobody can comply with the tax system and such trader's specific schemes are being introduced," he added.
Tax lawyer Waheed Shahzad Butt said though FBR was not treating it as amnesty but it was an amnesty scheme with intentional move to legalise their money and whiten it by paying pennies at the rate of one percent. The Rs 50 million working capital is in-fact an asset in the hands of trader and in normal mode, holder of Rs 50 million capital is liable to pay tax at the rate of 35 percent," he added.
He questioned that as to how a trader having Rs 250 Million turnover or having Rs 50 million capital can be termed a small scale business.
He said the VTCS amounts to encouraging corrupt elements with billions of illicit wealth which wais detrimental for the society.
FBR had indicated many times to take action after identifying more than three million potential taxpayers. By adopting a normal procedure to bring these people into tax net, FBR could collect several billions instead of mere peanuts by charging just 1 percent or Rs 30,000/- from Non-filer Tax evaders, Waheed said.
"As per report of Member (IT) FBR there are 3,660,332 registered taxpayers but only 856,826 are income tax filers, while out of the filers more than 200,000 paid nil income tax. This state of affairs reflects the state of affair going on in the FBR. If they are not able to enforce tax return from the already registered persons how they could catch new persons operating as traders, he added
Under the scheme, full tax liability on up to Rs 50 million earnings (in shape of capital) will be waived in favour of just one percent payment so much so they will also be exempted from annual audit for next three years. Eighty percent (80%) relief in turnover tax with four years immunity from selection for audit of tax affairs for the tax years 2015, 2016, 2017. All these are discriminatory and unconstitutional and it will badly damage the concept of exiting Income Tax Ordinance, 2001 and its enforcement,he added.
As per reports FBR has so far collected Rs 8 billion from withholding tax on banking transactions of non-filers. This was stated by tax officials of the FBR before the National Assembly Standing Committee on Finance. It clearly means that at least Rs 2667 billions have been rotated/transacted by the persons/citizens in Pakistan against which Rs 8 billion WHT has been collected by FBR. Tax collection ultimately means that all these persons are non-filers. If FBR simply concentrate on these transaction huge legitimate revenue may be collected out of these transactions routed by non-filers of the country, he added.
The lawyer said that the government through this amnesty scheme was promoting the un-documented culture because they were offering 4 years immunity from audit. Even for tax year 2018 it is out of domain of present government to announce tax relief because no one knows who would take over the government after next general election due in 2018, he added.
FBR Member and Spokesman Dr Muhammad Iqbal said that the VTCS was not an amnesty scheme. The target group of the earlier scheme was entirely different. It was Prime Minister's investment initiative to attract investment in Green Field Industrial Projects and other sectors.