ISLAMABAD: With the promulgation of the presidential ordinance for broadening of the tax base, the government has granted sweeping powers to the Federal Board of Revenue (FBR) for disconnection of mobile phones/SIMs, electricity, and gas connection of non-filers.
The National Database and Registration Authority (Nadra) will also share the exchange of information with the FBR and the potential tax dodgers will be identified through the use of Artificial Intelligence (AI).
The government has also given powers to the FBR to discontinue gas and electricity connections of persons, including tier-1 retailers who are either not registered or if registered, they are not integrated in terms of Section 3(9A) of the Sales Tax Act 1990.
A new section 114B (powers to enforce filing of returns) has been introduced in the Income Tax Ordinance 2001. The Board shall have the powers to issue Income Tax General Order in respect of persons who are not appearing on Active Taxpayer List (ATL) but are liable to file a return under the provisions of this ordinance. The Income Tax General Order may entail any or all of the following consequences for the persons mentioned therein; such as disabling of mobile phones or SIMs, discontinuance of electricity and gas connections.
The Tax Laws (Third Amendments) Ordinance 2021 states that Section 175A should be inserted, whereby the National Database and Registration Authority (NADRA) shall, on its own motion or upon application by the board, share its records and any information available or held by it, with the board, for broadening of the tax base or carrying out the purposes of this ordinance.
The National Database and Registration Authority (NADRA) may compute indicative income and tax liability of anyone mentioned under sub-sections (1) or (2) by use of artificial intelligence (AI), mathematical or statistical modeling or any other modern device or calculation method. The indicative income and tax liability computed by the National Database and Registration Authority (NADRA) under sub-section (4) shall be notified by the Board to the person in respect of whom such indicative income and tax liability has been determined, who shall have the option to pay the determined amount on such terms, conditions, installments, discounts, reprieves pertaining to penalty and default surcharge, and time limits may be prescribed by the board.
Another big enforcement measure introduced through this ordinance is the changes in the penal regime for the non-filers. The penalty for the non-filers has been increased to Rs1,000 per day of default. The government has increased the amount of penalty for tier-1 retailers who are not integrated with the FBR. The government has also imposed an additional advance tax on the rates ranging from five percent to 35 percent on the professionals using domestic electricity connections. The professionals covered accountants, lawyers, doctors, dentists, health professionals, engineers, architects, IT professionals, tutors, trainers, and other persons engaged in the provision of services.
The government has also enhanced extra tax rates on the industrial and commercial gas and electricity connections to the persons, who are unregistered. The government has granted sales tax zero-rating to fat-filled milk, including those sold in retail packing under a brand name or a trademark and also withdrawn on import of fruit from Afghanistan.
Any expenditure in excess of Rs0.25 million by the corporate sector to be inadmissible if not paid through digital mode. The salaries in excess of Rs25,000 per month if paid through digital mode to be admissible expense along with paid through other banking channels.
Under the ordinance, the reduced rate of 16 percent sales tax would be applicable on the supplies made by POS integrated outlets, where the payment is made through digital mode; reduced rate of 14 percent on remeltable scrap imported by steel meltors; reduced rate of five percent on import of electric vehicles on CBU condition and reduced rate of 16.9 percent sales tax on business to business transactions, where payment is made through digital mode. Moreover, the government has excluded steel and edible oil sectors from the charge of Further Tax U/S 3(1A) of the Sales Tax Act, 1990.
The FBR has included the “steel” sector in clause 24D to provide a reduced rate of minimum turnover tax to distributors, dealers, sub-dealers, wholesalers, and retailers at par with the cement sector. The government has also included local manufacturers of mobile phones in clause (11A) Part IV of the Second Schedule to exempt them from minimum tax at par with STZ and SEZ enterprises. The government has also included all entities mentioned in Table I of clause (66) of Part I of the Second Schedule in the Thirteenth Schedule to make donations eligible for the tax credit.
The ordinance has clarified that the remittance through Money Service Bureaus (MCBs), Exchange Companies (ECs), and Money Transfer Operators (MTOs) such as Western Union, Money Gram, and Ria Finance, or other like entities shall be deemed to constitute foreign exchange remitted from outside Pakistan through normal banking channels.
Published in The News, September 18, 2021