Promoting tax compliant culture

Although a number small business firms and non-registered partnership enterprises have started compliance for sales tax collection and its entry into purchase receipts that are given to the buyers of consumers’ goods. But majority of traders of sole proprietorship are resisting the documentation drive of the government which is now part and parcel of the finance act. Addressing a symposium at Sustainable Development Policy Institute, Chairman Federal Bureau of Revenue, ShabbarZaidi categorically said the condition of showing Computerized National Identity Card and the entry of its number by the selliner firm at the time of purchase worth Rs.50000 or more is mandatory and cannot be reversed. The Finance Act makes compulsory the entry of CNIC number of buyers in the sale record of seller firms. He urged the affluent people to treat government taxes like the Islamic levy of Zakat. It remains to be seen how far small business enterprises comply with the instruction regarding the submission of sales tax returns.

Chairman FBR painfully noted that Pakistan has been transformed from a semi manufacturing economy into a trading nation. It imports wide range of consumers’ goods that can be easily manufactured for domestic consumption and exporting the surplus production. It was because of encouraging this tendency that country’s imports jumped to $51 billion and exports shrank to $21 billion.

The reasons for turning a semi manufacturing economy into imports depend economy are well known, which include the policy of nationalisation of industries in 1972, lack of incentives for setting up the industries of raw material, intermediate goods and imports substitution and above all indifference towards induction and indegenisation of latest technologies by liberal allocations for industrial research and development. The redundancy and underutilization of the available infrastructure of institutions of Research and Development is a glaring example. The indifferent attitude shown for the formulation of a comprehensive industrial policy by the past governments and the present one as well reveal the perpetuation of keeping the country as trading nation instead putting it back on the path of manufacturing based economy. The political leadership who made the shady power purchase agreements knew well the disastrous impact of such deals on the productive capacity of the economy but self interest was given preference over national interest. The regressive and complicated tax regime and sky high tariffs of energy inputs are the discouraging factors that impede fresh domestic and foreign investment. Foreign direct investment has declined to the lowest level of $750 million.

The Chairman FBR has sent a letter to the heads of all commercial banks asking therein for the compilation of data about Benami Accounts by all branches of banks for onward transmission to the FBR. The details collected about Benami Accounts holders shall be submitted within 15 days. There is a possibility that such accounts may have been opened under the title of foreign currency accounts. Certain sections of “Protection of Economic Reforms Act” of 1992 provide strong secrecy cover to foreign currency accounts and transactions made therefrom and therein. Section 5 of the Act grants total immunity to such accounts holders against any inquiry by the tax authorities. Clause (2) of the same section provides exemption to deposits in these accounts from the levy of income tax, wealth tax and even compulsory deduction of Zakat on the first Ramazan every year. Clause (3) of this section legally binds all banks to maintain complete secrecy about foreign currency accounts. Federal Law Minister Dr. FaroghNasim once hinted at amendment in this Act in a current affairs programme of a private TV Channel few months ago but nothing was heard about any draft legislation to plug the loopholes that have been built in the “Protection of Economic Reforms Act” for purpose of money laundering and tax evasion. Amendment in this Act seems inevitable if the government really wants transparent and compliant tax culture.

The post Promoting tax compliant culture appeared first on The Frontier Post.

from The Frontier Post https://ift.tt/2JOkvOc