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Tuesday, May 21, 2024

Standing committee rejects many proposals in the new finance bill 2021-22

As a measure to broaden the tax base, there was agreement on exemption of import duty on card reader machines, while the government has also announced the abolishment of tax on import of point-of-sale machines and these accessible to retailers for duty-free import.

In accordance with the legislative procedures, the proposals made in the recent budget for the upcoming fiscal year 2021-22 were being reviewed by the Senate Standing Committee on Finance for a continued third day on 17th June, and accordingly many proposals by the government are being amended, rejected, or accepted by the committee.

According to the national media reports, one of the major reforms that were brought under the microscope was the taxation of the undisclosed offshore assets of Pakistanis.

In this regard, the incumbent government has proposed to open more than five-year-old cases to tax such assets, along with the proposal to seek taxes on “suspicious” gift transactions.

Dr. Najeebullah Malik, chief of Inland Revenue Policy FBR said that in the Finance Bill 2021, the government has recommended a maximum time limit of five years to serve tax notices to a person who fails to disclose details of any foreign assets, also known as offshore assets, or any foreign income in his returns.

According to the existing law, the FBR cannot serve notice for a case older than five years in case of the filer, and for more than ten years in case of a non-filer of the income tax returns.

However, a new amendment was brought in section 114, sub-section 5 which said, “Provided further that the time-limitation provided under this subsection shall not apply if the Commissioner is satisfied on the basis of reasons to be recorded in writing that a person who failed to furnish his return has foreign income or owns foreign assets.”

Read More: Did PTI present a pro-people budget?

This implies that if the commissioner, a grade 20 officer, is not satisfied, the records exceeding the time limits can be opened to be reviewed.

Reportedly, the standing committee was also informed of the amendments brought about to streamline the legal proceedings regarding the regulation of gifts. According to reports, Rs170 billion worth of money was sent by the taxpayers in the last fiscal year as tax-exempted gifts.

Thus, an amendment has been proposed in Section 37 sub-section  (4A), where the following proviso was added, “Provided that, if the capital asset acquired through a gift is disposed of within two years of acquisition and the Commissioner is satisfied that such gift arrangement is a part of a tax avoidance scheme, then the provisions of sub-section (3) of section 79 shall apply for the purpose of determining the cost of the asset in the hands of the recipient of the gift.”

This is an effort to impose taxes on gifts that are disposed of within two years of acquisition. People buy an asset today then transfer it in the name of a relative a few years later for onward sale to avoid capital gains tax, Tariq Chaudhry, Member Inland Revenue Policy said.

Another amendment has been proposed in Section 39, which says, “in sub-section (1), in clause (la), for the expression “grandparents, parents, spouse, brother, sister, son or a daughter”, the expression “relative as defined in sub-section (5) of section 85” shall be substituted.”

This would now extend to more people defined as relatives under the law, such as spouse, adopted son, grandparents, among others.

Other Acceptances and Rejections

The committee approved the mechanism to abolish tax on pensions and allowances of the government employees.

Read More: Budget 2021 and the whines of fading hopes

The committee members rejected the proposal of withholding tax on non-filers’ electricity bills exceeding Rs25,000 per month.

Also rejected the recommendation of tax on the markup of more than Rs500,000 for Provident Fund.

Reportedly, Chairman of the committee Senator Talha Mehmood said that the declaration of a business bank account will create problems.

According to a national news agency, Senator Farooq Naik of PPP said that punishment and fine should be imposed for intentional concealment of the business bank account. The committee, however, did not approve this proposal of the government. The minimum fine will be Rs0.1 million and imprisonment.

The automobile sector of Pakistan was also brought into the discussion, as the officials of the Ministry of Industries and Production and Engineering Development Board were summoned to discuss the tax reduction on vehicles up to 850cc.

Senator Saleem Mandiwalla reportedly argued that Pakistan was a country that produced the most expensive cars, and a poor man could not even think of buying a car.

“There is no mechanism for car prices here. Even today, there is no complete production of vehicles at the local level,” he said.

Senator Mohsin Aziz added that the local auto industry has been playing with this country for 20 years.

Discussing the recent proposal to withdraw corporate tax, the FBR briefed the standing committee that this withdrawal proposal was in line with the IMF’s recommendations.

As a measure to broaden the tax base, there was agreement on exemption of import duty on card reader machines, while the government has also announced the abolishment of tax on import of point-of-sale machines and these accessible to retailers for duty-free import.

Media outlets reported that the committee also had decided to summon the Drug Regulatory Authority of Pakistan on the issue of medicinal drug prices in Pakistan and to ascertain whether the proposed reduction in duties would result in a low selling price of the medicine.

The committee on the other hand unanimously approved proposals to reduce duties on chemicals for food processing and change the duty structure to promote Euro-V vehicles in the country.

Read More: Here is a summary of Pakistan’s budget for fiscal Year 2021-22

The Standing Committee on Finance also approved tax rebate on turnover of Rs400 million, to investigate income and assets for non-resident Pakistanis, the option of electronic appeals, to issue tax exemption to companies within 15 days, 1pc tax on export of services, to maintain 4pc super tax on banks and tax on cars’ on-money.