Tax Review/Taxation Huzaima & Ikram July 01, 2013 Daily ...imranghazi.com/mtba/downloads/News/2013/Newsletter 01.07.2013… · Ms. Sadaf Bukhari 0301-8458701 Mr. Saleem Zahid 0300-4217408

Tax Review/Taxation

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Huzaima & Ikram July 01, 2013

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This issue contains:

• BUDGET SPECIAL

Finance Act, 2013.

Recommendations of Senate of Pakistan in the Finance Bill, 2013

Salient Features of the resource mobilization measures relating to Sindh Sales Tax on Services in the Sindh Budget 2013.

• ARTICLE

Taxing the taxed: Income Support Levy Act, 2013

• TAX NEWS

FBR again misses revenue collection target

Staggering failure: FBR misses revenue target by Rs461 billion

Price hike: Transporters warn of countrywide strike if FBR sticks to rise in tax

Bajwa appointed new FBR chairman

2012-13 worst financial year for FBR

July-June (2012-13): FBR suffers Rs 456 billion historical shortfall

Kind regards

Mrs. Huzaima Bukhari Editor

Lahore Office No. 14, Second Floor, Sadiq Plaza, 69-The Mall, Lahore 54000 Pakistan Ph. (+9242) 36280015 & 36365582

Lahore Mr. Shabbir Ali 0322-4291828 Mr. Shahbaz Ahmad 0300-4521453

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Other cities Mr. Aftab Sajid 0305-5199004

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Finance Act, 2013

[AS PASSED BY THE NATIONAL ASSEMMBLY]

Please discard the Finance Bill sent on 28.06.2013 and consider the following (we regret the inconvenience caused):

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SENATE SECRETARIAT

RECOMMENDATIONS OF SENATE OF PAKISTAN IN THE FINANCE BILL, 2013

BUDGET PROPOSAL 2013‐14

CLAUSE 2

1. The Senate recommends to the National Assembly that sub clause (3) of clause 2 of the Finance Bill, 2013 substituted as under:-

a. ‘(3) For section 14-A the following be substituted, namely:-

b. 14-A Provision of security and accommodation at custom-ports etc.

Any agency of person including ports authorities managing or owing a custom ports , a custom-Air Ports or a Land Custom Stations or a container Fright Station shall provide at its or his own cost adequate security and accommodation to custom staff with officers for examination of good, detention and storage of goods and for others departments requirements to be determined by the collector of Custom.

2. The Senate recommends to the National Assembly that sub clause (3)(2) of clause 2 be substituted as under:-

a. “ (2) If an officer not below the rank of Assistant Collector of custom issues a certificate to a person that the delay and detention of the goods to be imported or exported was not account of delay on his part, the agency or the person including port authorities managing or owning a custom ports, a customs airport or a land custom station or a container Freight station shall refund demurrage charges which the agency or a person has received on account of the delay from that per because of no fault of importer or exporter”.

CLAUSE 3

3. The Senate recommends to the National Assembly that sub clause 2 of the clause 3 be deleted.

4. The Senate recommends to the National Assembly that in sub clause 3 of the Finance Bill, 2013 the words “in the supply chain” be deleted.

5. The Senate recommends to the National Assembly that in sub clause 10 (1) the full stop occurring at the end be deleted and following words be added.

“but the concerned shall have no power to review its own orders except to rectify the said mistake”

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CLAUSE 4

6. The Senate recommends to the National Assembly that newly added sub clause 17(c) of the clause 4 of the Finance Bill, 2013 be substituted as under:-

a. “(c) After clause b as amended as aforesaid , the following new clause shall be added namely;

b. ( c) is an Officer of inland revenue service having an experience of more than 15 years in Grade BS-17 and above or is a law graduate having a standing of at least fifteen years

7. The Senate recommends to the National Assembly that Sub-Clause 17( c) of the clause (4) of the Finance Bill, 2013 authorises appointment of an officer in BPS-17 with 15 years experience as Judicial Member of the Appellate Tribunal. This may result in appointment of junior officers in BS-18 or 19 as Judicial Member which will compromise the effectiveness of the Appellate Tribunal. It is therefore proposed that only officers in the BS-20 or above who are Law Graduates may be appointed as Member Judicial.

CLAUSE 5

8. The Senate recommends to the National Assembly that in sub clause (4) of the clause 5 the word “Commissioner” be replaced with the word “ Chief Commissioner”.

SECTION 18

9. The Senate recommends to the National Assembly that section 18 of the Chairman and Speaker (Salaries, Allownaces and Privileges) Act, 1975, be restored to pre-2010 position through Finance Bill 2013.

UNANIMOUS RECOMMENDATION

10. The Senate recommends to the National Assembly that in accordance with court verdicts the government may allocate funds for payment of compensation to the land owners whose land was acquired decades ago for AFV Ranges Nowshera in Khyber Pakhtunkhwa.

11. The Senate recommends to the National Assembly that to clear the four times throw forward liability of the actual PSDP, 80 % PSDP may be allocated to an ongoing project while 20 % should be earmarked for new projects. Fast Moving Projects should be given priority for completion to create a space for new projects in the forthcoming PSDP.

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12. The Senate recommends to the National Assembly that the share of Balochistan province in PSDP 2013-14 should be increased from 9%-10% to 15%-20% to clear the huge backlog of the ongoing projects and a sizable amount should be kept for new development projects.

13. The Senate recommends to the National Assembly that releases should be processed rapidly as it takes months to process any funding for the projects. Ministry of Finance, AGPR and Planning Division should clear all releases in a week’s time instead of months and months.

14. The Senate recommends to the National Assembly that Fiscal Year should begin from 1st July instead of a delay of two months for all PSDP funded projects. Likewise, 1st Quarter on 1st July, 2nd Quarter on 1st October, 3rd Quarter on 1st January and 4th Quarter should be started on 1st April. The initial delay of two months disturbs the entire system. On time start of the Fiscal year is the only way to avail atleast300 working days in a particular fiscal year. Moreover the slack season (Summer and Winter) should be utilized properly.

15. The Senate recommends to the National Assembly that there is great need to improve the standards of Monitoring and Evaluation it should be done through proper trained professionals instead of existing system where the staff of the I&M section of Planning Commission is in-sufficient and in-effective for Monitoring.

16. The Senate recommends to the National Assembly that the banking industry infrastructure and a well knitted branch system should be developed throughout Balochistan.

17. The Senate recommends to the National Assembly that the necessary amount required for the completion of the Makhai Farash Link Canal project, Chotiaria Phase-II, Sindh, may be released during the current financial year so that a scheme of great public interest may be completed.

18. The Senate recommends to the National Assembly that due to rise in the prices of inputs in the agricultural sector, the credit facility to farmers per produce index unit may be increased by 20%.

19. The Senate recommends to the National Assembly that funds may be allocated for supply of Gas Pipeline to District Umarkot in the Province of Sindh.

20. The Senate recommends to the National Assembly that proposals for demand of grants of various Ministries be routed and sanctioned/allowed through the relevant Standing Committees of Parliament.

21. The Senate recommends to the National Assembly, that after the passage of the budget, the concerned Standing Committees of Parliament Oversee, and monitor the expenditure of various Ministries of the government.

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22. The Senate recommends to the National Assembly that in order to address the issues of mismanagement, and financial losses, the management of Public Sector Enterprises should exclusively consist of professionally qualified people whose qualifications have nexus to the nature of the state enterprise.

23. The Senate recommends to the National Assembly to merge/amalgamate all those Ministries which are related and have nexus to energy into one Ministry, so as to facilitate coordination and to address issues of load shedding.

24. The Senate recommends to the National Assembly to evolve a package for Overseas Pakistanis, which should include reduction of Custom’s Duties on house hold items, vehicles upto 1000 c.c., and acquisition of state, land for industrial/commercial and residential purposes.

25. The Senate recommends to the National Assembly that the Section 22 of the Sales Tax Act 1990 “A registered person will now be required to maintain records relating to gate passes, inward or outward and transport receipts in addition to the records”. Be deleted as extra ordinary record has to be maintained.

26. The Senate recommends to the National Assembly that there should be money allocated for a Special Fund for Victims of Drone Strikes in the budget: Compensation for dead persons or whose houses are destroyed, medical treatment for wounded, Education for orphans who lost parents in drone strikes. This can be called Special Fund for Drone Victims. This will also send the right message to the outside world that we are serious on opposing the Drone Strikes & that there is no longer any dual policy on drone strikes as in the past (condemning publicly but condoning privately).

27. The Senate recommends to the National Assembly that the proposal for FBR access to all bank accounts in Pakistan is too intrusive, against privacy of individuals and is prone to abuse & misuse since FBR is itself susceptible to corruption, as even stated by the Honourable Chief Justice of Pakistan. It will likely lead to loss of confidence of Pakistan's people in their own banks, almost similar to loss of confidence suffered due to seizure of foreign currency accounts after the 1998 nuclear tests. This proposal should, therefore, be withdrawn.

28. The Senate recommends to the National Assembly that if the government is sincere & serious in catching the real tax-evaders, then Fairness & justice demand that bank accounts held by Pakistanis in secret accounts in Swiss banks and off-shore overseas accounts also be made accessible to SBP, because that is where the 'big fish' have parked their accounts. There is already a precedent since the United States government asked for details of secret Swiss Bank accounts of American citizens to catch tax-evaders. This proposal may also be included in the Budget.

29. The Senate recommends to the National Assembly that given the security threat posed by snooping & spying by the US through their secret agencies like CIA &

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NSA, especially of Pakistan which is the second highest in their list of countries being spied online, money should be allocated in the Budget for a Cyber Security Strategy since Pakistan is a victim of Cyber Warfare and Cyber aggression. This should be entrusted to a Cyber Security Task Force, specially constituted for the purpose, that can then propose counter measures. It's Secretariat should be in the Ministry of IT.

30. The Senate recommends to the National Assembly Given the threat of extremism & terrorism and failure to combat it over the last decade, money should be put in the Budget for preparing a Counter Terror Strategy involving the Ministry of Interior, Ministry of Defence & Ministry of Information through a Special Inter-Ministerial Task Force, including outside experts & specialists. It's secretariat should be in the Cabinet Division.

31. The Senate recommends to the National Assembly that FBR should encourage the compliant tax payers by providing recognition. The said recognition should be in the form of ‘Tax Compliant Card’. It will lead to recognition nationwide and the said card holders to be given priority in tax refunds, concession in tax rates, quota allocations and speedy processing of cases at appellate forums. Tax complaint cards are already issued in USA.

32. The Senate recommends to the National Assembly that FBR should introduce ’FBR privilege Card’ for compliant tax payers who significantly contribute in national exchequer. The said privilege card should be provided to individuals and corporate with the benefits including but not limited to availability of finances at discounted rates, travel privileges, easy processing of utilities connections, incentives to investment in new business ventures, exemption of taxes on royalties and technical fees for bringing new technologies in the country, reduced rates of taxes on dividends.

The FBR privilege Card should be given to corporate which contributes over Rs. 200 M in national exchequer. For individuals, it should be given on Rs.5 M or more paid in income taxes.

33. The Senate recommends to the National Assembly that revision of return before assessment shall be the right of assesses. If the revision is done voluntarily before issuance of notice on it the Commissioners’ prior approval should not be required.

34. The Senate recommends to the National Assembly that empowerment of commissioner to conduct audit of assesses is purely a judgment for which many reasons may be recorded. It would be more pertinent that the power be given to the Chief Commissioner instead of the Commissioner.

35. The Senate recommends to the National Assembly that the charge of withholding tax on corporate structure basis of the business is punitive and against the spirit of withholding tax regime. Withholding tax rates have always been defined items/ products supplied and on the basis on resident or nonresident taxpayer basis. The choice of

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corporate structure is a business decision of an individual/ individuals which may not be questioned for withholding purposes. Further, firms are not allowed under constitution of Pakistan to incorporate as companies, e.g., Chartered accountant firms are not allowed by operation of law to incorporate company.

36. The Senate recommends to the National Assembly that the Income Tax be levied on all agricultural produce and on all agro based industries, ensuring exemption for low income farmers and agricultural producers/cultivators;

37. The Senate recommends to the National Assembly to reduce corruption and improve efficiency of Federal Board of Revenue (FBR) through announcement of specific measures.

38. The Senate recommends to the National Assembly that Overseas Pakistanis have received no consideration or even been mentioned in the Budget Speech. Assign a greater role to the overseas Pakistanis in the fast and sustainable economic development of Pakistan, for example creating public private partnership models with overseas Pakistanis in housing sector including low cost housing schemes, establishment of IT parks, industrial zones, technology cities etc;

39. The Senate recommends to the National Assembly that the import duty on cosmetic be enhanced.

40. The Senate recommends to the National Assembly that Karachi, the commercial capital of Pakistan, the greatest engine for economic growth of the nation has been completely ignored. Special grants and allocations need to be made to mega schemes on hold in Karachi due to non-availability of funds, lyari Expressway, Karachi mass transit S-3 and K-4 and other approved schemes in the form of a "Karachi Package".

41. The Senate recommends to the National Assembly to reduce Federal Government Expenditure and adopt more austerity measures.

42. The Senate recommends to the National Assembly to reduce abuse of Afghan

Transit Trade, Under-invoicing and curb smuggling in Pakistan. 43. The Senate recommends to the National Assembly to ensure promotion of

organized micro-finance sector, venture capital financing, cooperative farming, agricultural reforms, small medium enterprises, labor intensive and value addition industries.

44. The Senate recommends to the National Assembly to improve equity in taxation system by increasing the direct and indirect tax ratio to 45:55 from35:65.

45. The Senate recommends to the National Assembly to abolish SRO culture, Duty exemptions and abuse of SRO be abolished.

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46. The Senate recommends to the National Assembly to bring fiscal and Monitory Policies in alignment with each other.

47. The Senate recommends to the National Assembly that minimum wage for workers under the Labour Policy should be announced and be raised to Rs. 10,000/- per month;

48. The Senate recommends to the National Assembly to take effective and stringent steps to eradicate under-invoicing and undervaluation;

49. The Senate recommends to the National Assembly that the deficit gap widened due to increase in expenditure and fall in tax collection, therefore, expenditure be reduced and tax collection machinery be geared up by adopting administrative measures.

50. The Senate recommends to the National Assembly that SRO 500 (1)/ 2013 and SRO 503 (1)/ 2013 which seek to withdraw concessions available to 13 districts of Khyber Pakhtunkhwa, FATA and PATA. These SROs may be withdrawn immediately.

51. The Senate recommends to the National Assembly that the procedure of sales tax refund for retailers, which is very complex, be simplified.

52. The Senate recommends to the National Assembly that the procedures of 50% concession on sales tax refund allowed to retailers in Khyber Pakhtunkhwa be simplified.

53. The Senate recommends to the National Assembly that the Funds allocated in PSDP for the Hydel Projects of National Strategic Importance are very low. The allocation for the following projects s be increased and the completed projects should be connected to the national grid.

(1.Allai Khwar Hydro Power Project, Mansehra; 2.Diamer Basha Dam; 3.Dasu Hydro Power Project, Kohistan; 4.Dubair Khawar Hydro Power Project, Kohistan; 5.Golan Gol Hydro Power Project, Chitral; 6.Harpo Hydro Power Project Skardu; 7.Keyal Khawar Hydro Power Project; 8.Jabban Hydro Power Project; 9.Tarbela 4th Extension Hydro Power Project.)

54. Senate Recommends to the National Assembly that the Funds allocated in PSDP for the following Feasibility Studies of Hydel Power Projects be increased as these are the projects of National Strategic importance,

(1.Basho Hydro Power Project; 2.Bunji Hydro Power Project; 3.Chor Nallah Hydro Power Project; 4.Dudhnial Hydro Power Project; 5.Kohala Hydro Power Project; 6.Pattan Hydro Power Project; 7.Phandar Hydro Power Project; 8.Spat Gah Hydro Power Project; 9.Thakot Hydro Power Project; 10.Trappi Hydro Power Project)

55. The Senate recommends to the National Assembly that the secret funds of

Governors, Chief Ministers and Provincial Ministers and advisors be abolished.

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56. The Senate recommends to the National Assembly that as Iran has pledged to

add one thousand mega watt electricity to our national grid. From the amount

allocated for energy sector, sufficient amount be allocated and released for this

project.

57. The Senate recommends to the National Assembly A handsome amount of funds be allocated for electricity generation through run- of-water projects on the river Indus, river Kunhar in thr northern areas of the country.

58. The Senate recommends to the National Assembly that the salaries of the Government employees in BS 1-16 be increased @ 15% and the salaries of employees in BS 17-20 be raised @ 10%.

59. The Senate recommends to the National Assembly that the allocation in PSDP for Lowari Tunnl be increased.

60. The Senate recommends to the National Assembly that the lowest taxable income slab be kept at Rs.500,000 instead of Rs. 400,000.

61. The Senate recommends to the National Assembly that provision of funds for completion of Mirani Dam and other projects being executed by the WAPDA, in the province, be ensured in the PSDP.

62. The Senate recommends to the National Assembly that funds be allocated in the Fedeiral PSDP for completion of road network for complete connectivity of the port.

63. The Senate recommends to the National Assembly that under the Prime Minister’s youth skill development programme youth of Balochistan may be provided training in the fields of mining, marble cutting and other related fields.

64. The Senate recommends to the National Assembly that funds be allocated for establishment of the campus of COMSATS university at Quetta and Peshawar.

65. The Senate recommends to the National Assembly that for prime minister internship programme graduation may be set as qualification for the youth of Balochistan and three year age relaxation be also given to them.

66. The Senate recommends to the National Assembly that educational qualification may also be relaxed for the youth of Balochistan for PM loan scheme.

67. The Senate recommends to the National Assembly that all duties be remitted on import of solar cells, solar panels and all other related accessories.

68. The Senate recommends to the National Assembly that sufficient funds be allocated for exploration of oil and gas in the province of Balochistan.

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69. The Senate recommends to the National Assembly that a pre-budget session of the Parliament should be held at least 1 month before the actual budget is presented in Parliament, in which all budgetary proposals are placed before the Parliament.

70. The Senate recommends to the National Assembly that the budget of each Ministry should be placed before the respective Standing Committees of Parliament, at least eight weeks before the Budget session.

71. The Senate recommends to the National Assembly that a comprehensive national policy for Pakistan’s food security, agriculture and research development must be framed and included in both the Government’s economic vision and medium term budgetary statement, detailing concrete incentives, measures and interventions for the sector.

72. The Senate recommends to the National Assembly that only those projects should be included in the PSDP that have undergone a pre-project economic appraisal, an environment impact assessment and a cost benefit analysis.

73. The Senate recommends to the National Assembly that the 30% expenditure cut in all Ministries announced by the Prime Minister must be reflected in the allocated Current Expenditures of the Budget.

74. The Senate recommends to the National Assembly that PSDP allocations should be prioritized on the basis of national economic and strategic importance as well as balanced development in all Provinces and Regions.

75. The Senate recommends to the National Assembly that Federal Excise duties levied on services should be withdrawn.

76. The Senate recommends to the National Assembly that allocations for Health and Education projects that are the Constitutional responsibility of the Provinces should be dropped.

77. The Senate recommends to the National Assembly that the current proposal for salary taxation is regressive and not acceptable. It may be reviewed to be made more equitable.

78. The Senate recommends to the National Assembly that Finance Bill has proposed that the parameters for selection of audit through computer balloting by the FBR shall remain confidential. This is against the principle that the tax system should be fair, transparent and easy to understand. Taxpayers are entitled to know what the parameters for selection of audit through computer balloting are. FBR must make these public.

79. The Senate recommends to the National Assembly that as Finance Bill has proposed to reduce minimum tax liability of those persons engaged in the distribution of cigarettes, and cigarette smoking has scientifically been proven to be injurious to health. The proposed changes may be withdrawn.

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80. The Senate recommends to the National Assembly that the Medium Term Budgetary Statement presented as part of the Federal Budget includes three-year rolling targets for macroeconomic indicators. In order to encourage broadening of the tax base, targets for number of taxpayers filing income tax returns may also be set and people with NTN must be made to file their returns.

81. The Senate recommends to the National Assembly that special funds, fees, scholarships, fee wave off in universities for the students of FATA and PATA. Quota for the admission in the various universities of Pakistan, i.e. Medical, Engineering, Universities may be increased.

82. The Senate recommends to the National Assembly that Special arrangements may be made for peaceful returning of FATA -IDPs to their homeland.

83. The Senate recommends to the National Assembly that Hydel power projects may also be initiated in the FATA to meet the energy requirement of the area.

84. The Senate recommends to the National Assembly that KPK and FATA are most affected areas due to prevailing law and order situation, due to which the industries and trade have been badly affected. In order to promote industry and trade it is strongly recommended that 2% sales tax and similarly 2% income tax may be exempted as special case.

85. The Senate recommends to the National Assembly that as main power transmission lines were installed for power supply in 1975, these transmission lines have gone out of order and are damaged from different places. In this area, there are, many Marble Industries, which contribute more than 02 billion per annum in national exchequer. These industries as well as masses facing problems due to continues failure of electricity power due to the damage of transmission lines. It is recommended that reasonable funds may be allocated in the financial budget as per requirement.

86. The Senate recommends to the National Assembly that three PC-I related to Balochistan. 3 projects of solar energy in Balochistan already approved by Planning Commission shall be included in the Federal PSDP 2013-14.

87. The Senate recommends to the National Assembly that Quetta to Zhob gas pipeline PC-I feasibility report of which is already prepared lying with Sui Southern Gas Company Ltd. may be included in the Federal PSDP 2013-14.

88. The Senate recommends to the National Assembly that Chartered Accountants with experience of ten years may be appointed as accountant member in the Appellate Tribunal.

89. The Senate recommends to the National Assembly that through an Amendment in Finance Act, 2012 accountant members were also made eligible for being

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appointed as the Chairman of the Appellate Tribunal. Accountant Member are normally officers of the Department, therefore, only Judicial Members may be appointed as Chairman Appellate Tribunal.

90. The Senate recommends to the National Assembly that the Ministry of Finance may allocate appropriate funding for the provision of child care facilities within office premises for the female government employees to facilitate the objectives of the Government to bring women in the mainstream and create enabling environment for the working women of Pakistan.

MAJORITY RECOMENDATIONS

91. The Senate recommends to the National Assembly of Pakistan to withdraw the raise in the General Sales Tax, as it would raise prices of all commodities which would adversely affect the common man.

92. The Senate recommends to the National Assembly for subsidy to farmers on fertilizer pesticide, seeds, and the tariff on electricity in areas where water for irrigation purposes is lifted through lift machines in the Charki areas.

93. The Senate recommends to the National Assembly to allocate funds for construction of dual carriage between Mirpurkhas and Umarkot in Sindh Province.

94. The Senate recommends to the National Assembly that the travel and daily allowances for members of Parliament who travel by road should be rational as compare to other institutions of the State/ members of parliament who travel by air.

95. The Senate recommends to the National Assembly that the Public Accounts Committee should also consist of Members of the Senate, that the said committee may be a representative Committee of both Houses of Parliament.

96. The Senate recommends to the National Assembly that the Clause 2, 3 of Finance Bill, 2013, the Section 3 (a) of Sales Tax from 16% to 17% be withdrawn. This will adversely affect the prices of food items, which are already out of the reach of general public.

97. The Senate recommends to the National Assembly that through SRO. 503(I)/2013 withdrawn the facility of 100% refund of SalesTax on export of vegetable ghee and it is restricted to 90% as mentioned in SRO.1201(I)/2007, is a discriminatory measures with Vegetable Ghee sector as well as Khyber Pakhtoonkhwa because export is tax free all over the world.

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98. The Senate recommends to the National Assembly that the proposed amendments in the Budget that suggests to impose extra taxes of different types of supplies to or purchases from un-registered persons may be replaced with the following.

“A nominal percentage of withholding tax (say 0.001%) should be imposed through banks on all kinds of outward remittances made by any bank account holder to a bank account of a registered person or deposit of cash by any CNIC holder in the account of registered person. This will enable FBR to compile data of business payments made by any un-registered person to a registered person. On the basis of data collected from banks, FBR must initiate proceedings to register those un-registered persons who are required to be registered under the sales tax rules 2006. FBR’s website should be made helpful for the banks to identify the registered persons at the time of making any remittance or deposit of cash into its account.”

99. The Senate recommends to the National Assembly that sub clause (38) of clause 4 of Finance Bill, 2013 be deleted.

100. The Senate recommends to the National Assembly that in sub clause (1) of the clause 5 of the Finance Bill, 2013 the words “ by the notification in the officer’s gazette” be omitted and the word” two percent” the word “ one percent “ be substituted.

101. The Senate recommends to the National Assembly that revision of return before assessment shall be the right of assesses. If the revision is done voluntarily before issuance of notice on it the Commissioners’ prior approval should not be required.

102. The Senate recommends to the National Assembly that empowerment of commissioner to conduct audit of assesses is purely a judgment for which many reasons may be recorded. It would be more pertinent that the power be given to the Chief Commissioner instead of the Commissioner.

103. The Senate recommends to the National Assembly assembly that more 'Food and Energy Subsidy' be provided for masses

104. The Senate recommends to the National Assembly that the travel and daily allowances for members of Parliament who travel by road should be rational as compare to other institutions of the State/ members of parliament who travel by air.

105. The Senate recommends to the National Assembly that uncertain external revenues (e.g. the anticipated revenues expected from auction of 3G License, Coalition Support Fund, outstanding dues from Etisilat) should not be included in the revenue receipts of the annual budget.

106. The Senate recommends to the National Assembly that the block allocation of Rs. 115 billion in the PSDP for development initiatives should not be included without specifying approved projects. Only approved projects should be included in the Budget.

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107. The Senate recommends to the National Assembly that distortions in the income tax regime must be rationalized, especially in the case of the capital gains tax.

108. The Senate recommends to the National Assembly that all those clauses presented in the Finance Bill, 2013 to reward and reform tax officials should be dropped.

109. The Senate recommends to the National Assembly that all those sections and clauses included in the Finance Bill, 2013 that are not within under the purview of a money bill should be dropped.

110. The Senate recommends to the National Assembly Income support levy should either be withdrawn or amended as a tax, so that revenues collected to go to the Federal Divisible pool. So that the provinces get their due share.

111. The Senate recommends to the National Assembly that three PC-I related to Balochistan. 3 projects of solar energy in Balochistan already approved by Planning Commission shall be included in the Federal PSDP 2013-14.

112. The Senate recommends to the National Assembly that Quetta to Zhob gas pipeline PC-I feasibility report of which is already prepared lying with Sui Southern Gas Company Ltd. may be included in the Federal PSDP 2013-14.

113. The Senate recommends to the National Assembly Sub-Clause 17( c) of the clause (4) of the Finance Bill, 2013 authorizes appointment of an officer in BPS-17 with 15 years experience as Judicial Member of the Appellate Tribunal. This may result in appointment of junior officers in BS-18 or 19 as Judicial Member which will compromise the effectiveness of the Appellate Tribunal. It is therefore proposed that only officers in the BS-20 or above who are Law Graduates may be appointed as Member Judicial.

Mag. 276 Magazine Section

2013 Tax Review International

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Taxing the taxed: Income Support Levy Act, 2013 by

Zafar Azeem*

n the current budget, the government has proposed to levy a wealth tax by proposing to enact a new law.1 The object of the tax is to provide financial assistance, social protection and a safety net of

measures for economically distressed persons and families. The step is being taken pursuant to the principles of policy as provided in the Constitution of Pakistan 1973, 2 to provide for financial resources for running an income support fund for the distressed classes of people.3

IThe proposed law provides for a levy of tax on the net moveable wealth of the individuals.4 The proposed tax will be collected on the value of net moveable assets and shall be chargeable for every tax year with effect from the tax year 2013.5 The proposed tax shall be chargeable at the rate of 0.5% of the net moveable assets exceeding one million rupee.6 The proposed levy has raised many questions, first being the nature of levy, that is, whether the proposed tax is a wealth tax or transfer tax or an additional income tax and its impact on the markets and individual household. For example, transferor-based taxes are generally levied separately on inter vivos transfers like gift tax and on transfers at death like estate tax,

* The writer is an advocate and is currently working as an associate with Azim-ud-Din Law Associates.

1 The Income Support Levy Act, 2013 (hereinafter referred to as the proposed Act) 2 See article 29 through 40 of the Constitution of Pakistan 1973. 3 See the object and reasons for enacting the Income Support Levy Act, 2013. It has been

stated that proceeds from this levy will not go to the federal fund but would be directly transferred to the National Income Support Program for the needy and the existing support has been increased by 20 percent ie from Rs 1000 to Rs 1200 per month per person.

4 See clause (b) of section 2 of the proposed Act. The net moveable wealth means the amount by which the aggregate value of the moveable assets belonging to a person as declared in the wealth statement for the relevant tax year, is in excess of the aggregate value of all the liabilities owed by that person on the closing date of the tax year: Explanation.- For the purpose of this clause,- (i) where liability claimed relates wholly and exclusively to an immovable asset, it shall not be claimed and allowed while computing the net moveable wealth. However, where the liability claimed relates wholly and exclusively to a moveable asset, it shall be claimed and allowed as a straight deduction while computing net moveable wealth; and (ii) where the gross wealth of a person, declared in the wealth statement includes both moveable and immovable assets and the nature of assets to which the liability relates is not determinable, the liability to be allowed while determining the net moveable wealth shall be calculated by the following formula:- (A / B) x C Where - A is the gross value of moveable assets; B is the gross value of both moveable and immovable assts; and C is the gross value of debts owed.

5 See section 3 of the proposed Act. 6 See section 9 of the proposed Act.

Magazine Section Mag. 277

Tax Review International 2013

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or together in a single integrated tax.1 Recipient based taxes are levied on inter vivos transfers ie, gift tax, on transfers at death ie, inheritance tax, and on an integrated basis accessions tax. Where the government is seeking to address the additional tax capacity afforded by wealth it ordinarily allows top marginal income tax rates to be reduced without sacrificing overall tax progressivity. In the alternative, a wealth tax may add to the overall progressivity of an income tax without having to increase marginal rates.2 Hence, there is no room for justifying the net wealth tax with the support of the theory of ability to pay tax. A wealth tax base3 separate from an income tax base can help to ensure that taxes not collected on the latter, because of avoidance or evasion, might be collected on the former.4 This may be particularly true with regard to income from asset appreciation that has accrued but that is not taxed owing to the “realisation event” of the nature of most income tax systems.5 The distinction between transferor-based and recipient-based taxes is not black and white. In the case of transferor-based taxes, the existence of

1 The former UK Capital Transfer Tax, which was in effect from 1975 to 1986, was levied on a cumulative basis on all transfers during lifetime and at death. See, M.R. Moore, United Kingdom Inheritance Tax, 34 European Taxation 421 (1994). An integrated tax was established in the United States in 1976. See generally Joint Committee on Taxation, General Explanation of the Tax Reform Act of 1976 525-32 (1976). The US tax is still in effect.

2 The progressivity effects of wealth taxes have been the subject of much scholarly debate, most particularly in the United States. In that country, before the considerable increase in reliance on the income tax as a revenue source during the Second World War, the estate tax provided up to half the amount of revenue, as did the income tax, contributing substantially to the progressivity of federal taxation. See John E. Donaldson, The Future of Transfer Taxation: Repeal, Restructuring, and Refinement, or Replacement, 50 Wash. & Lee L. Rev. 539, 544 (1993). By the 1980s, the relative amount of contribution to total revenues by the estate tax had declined dramatically. Id. In 1994, estate and gift tax revenue represented 1.2 percent of federal revenue ($15.2 billion) in the United States. In France, the wealth tax yields F 9 billion out of total revenue of F 1,400 billion. See Le Monde, April 21- 22, 1996, at 6. According to one scholar, this drop has ensured that the estate tax no longer materially contributes to the progressivity of the federal tax system. Id. See also Joel C. Dobris, A Brief for the Abolition of All Transfer Taxes, 35 Syracuse L. Rev. 1215 (1984). According to one study, no country currently derives significant revenues from taxation of wealth. Henry J. Aaron & Alicia H. Munnell, Reassessing the Role for wealth Transfer Taxes, see 45 Nat’l Tax J. 121, 133 (1992). A strong wealth transfer tax system runs counter to deep-seated human motivations, making it unlikely that any jurisdiction would ever enact a wealth tax with sufficient revenue implications to add significantly to progressivity. Edward J. McCaffery, The Uneasy Case for Wealth Taxation, 104 Yale L. J. 283, 294 (1994). See also Charles O. Galvin, To Bury the Estate Tax, Not to.

3 The tax base for taxes on wealth includes either the world-wide net assets owned by, transferred to, received (depending on the type of tax) or given away by a taxpayer who has a sufficient connection with the jurisdiction, or those assets situated in a jurisdiction regardless of the taxpayer’s connection with it.

4 See, eg, Harry L. Gutman, Reforming Federal Wealth Transfer Taxes after ERTA, 69 Va. L. Rev. 1183, 1185-86, 1189-97 (1983); Henry J. Aaron & Harvey Galper, A Tax on Consumption, Gifts, and Bequests and Other Strategies for Reform, in Options for Tax Reform 106, 111-12 (Joseph A. Pechman ed., 1984).

5 See Paul B. Stephan III, Commentary: A Comment on Transfer Tax Reform, 72 Va. L. Rev. 1471, 1479 (1986).



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various exemptions, exclusions, and deductions based on the status of the recipient can make the tax liability similar to that under a recipient-based tax. In the case of a recipient-based tax, administrative techniques of collecting the tax at the level of the transferor can make it procedurally similar to a transferor-based tax. It is evident that the present levy corresponds to the status of a wealth tax or it may be considered as an income tax. If it is an income tax then the problem of double taxation can also arise. In a tax design there are three key constraints namely, efficiency, administrative costs and the political constraints. Even for tax reforms there are three main criteria. Welfare criteria is the first one1 which is a standard criterion generally used in tax reform. The other two include equality of opportunity and paternalism and these are very important from the wealth transfer taxation perspective. Generally the objective of government is to choose a tax structure that maximises social welfare, taking account of how individual behaviour will respond to the tax system obviously keeping in mind the need to raise revenue to finance expenditure on public services.2 The point here is that one person’s tax liability relative to another person’s is directly related to their (relative) well being,3 and on the principle of equality no discrimination is to be made. We are also confronted with the issue of taxable capacity, usually the responses to such issues are not direct, for example, and UK’s well known Meade Report on Tax Reform4 argues that wealth and consumption both are relevant for measuring taxable capacity. The proposed law on which we are debating is silent on a number of issues and it appears that the decision to levy this tax is simply based on the notion of levying a sort of charity contribution on a class of population without considering that whether or not it will bring in efficiency and it all leads to the question that how the issues of horizontal and vertical equity are going to be resolved.5

1 Welfarist criterion is the standard criterion used in tax reform in many countries. For reference see, James E Meade, The Structure and Reform of Direct Taxation, Routledge, First Edition, (2012).

2 Better-off individuals bear progressively higher tax bills with the degree of progressively depending on the size of behavioural responses as well as aversion to inequality by government as reflected in the rate at which marginal utility of consumption diminishes. And these are the efficiency and equity considerations. The marginal utility of consumption is marginal social utility as judged by government in its notional calculations of social welfare.

3 This approach is typically called welfares and, in our perspective levels of individual well being count in determining social welfare.

4 Id. n 7. 5 See Business Recorder's editorial dated June 13, 2013. The editorial states: The intentions

may be good, even noble, but the fact remains that assets are being taxed and not income. This may not be congenial to raising the investment to GDP ratio from 14 to 20 percent. To say that it may be treated as a 'religion card' but it needs to be reminded that there is an order by the honourable Supreme Court that Zakat, which is a compulsory religious levy, cannot be mandatorily collected by the government. We are also reminded of the Iqra surcharge or Education Cess on all imports that the late Dr Mahbubul Haq had imposed in one of the



The proposed levy brings with it a number of issues. Among them are the following which require our attention: (i) Tax payer’s physical presence or residence; (ii) Entities and resident and non-resident owners; (iii) Exemptions (iv) Valuation (v) Double taxation (vi) Physical persons or residence If we take the welfares approach literally, 1 all sources of well-being should count regardless of their source. We may refer to this as a strict welfares approach,2 and a number of special problems may arise in this context. For example, physical persons are taxed either as individuals or, if they are married, minors, or themselves have minor children, as part of a family group. The proposed law on this aspect of the issue is silent. (II) ENTITIES AND RESIDENT AND NON-RESIDENT OWNERS In most jurisdictions, only physical persons (individuals and families) are taxed.3 This means that, if all wealth is to be included in the base, that which is held indirectly through legal persons or other entities it must be attributed to the physical person taxpayer. 4 Moreover, attribution is necessary to prevent the double taxation of capital owned by entities. This involves determining who is the holder of the ownership interest and valuing the interest. The proposed law does not specify how these issues are to be settled! Ownership interests in entities other than companies, partnerships, or other typical methods for organising a joint business enterprise may be even more difficult to ascertain, and valuation of those interests, particularly if not publicly quoted, may also be difficult.5 The proposed law does not provide any directions in this regard and these issues can cause misadministration and corruption. For example, taxing persons holding wealth indirectly through equity-type interests in entities requires identification of the owner, as well as

budgets that he presented, with an assurance that collection under this head of account will not go to the federal fund but will be spent on education. An equally noble cause indeed as helping the needy, but what happened later on is something best not dwelled upon.

1 Kaplow, Louis & Steven Shavell, Reply to Ripstein: Notes on Welfares versus Deontological Principles, Economics and Philosophy, Volume 20, 2004, page 209.

2 A comprehensive survey of the optimal taxation of bequests can be found in Cremer and Pestieau (2006). Our discussion draws heavily on that.

3 This is also the general rule followed in the Nordic countries. In fact, Germany's law is the exception.

4 For example, in France, wealth held by physical persons through companies, associations, and foundations is included in the physical person's tax base.

5 The general matter of valuation is considered infra at secs. II(B)(3) & III(F). See also infra text accompanying notes 51-67 concerning legal forms of organising business enterprises.



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the determination of the nature of the interest, and the same is quite difficult. It may lead to litigations and delays making the effort of taxation worthless. Similarly the family trusts, and entities like that also pose problems of identification and determination of interest. These entities are often set up by individuals to hold and manage wealth.1 The trust is a creation of law. 2 The basic legal concept of the trust is the separation of the ownership interests in property into a legal title, held by one or more trustees, and an equitable title, held by one or more beneficiaries. The legal title gives the trustees control over the property, while the equitable title gives the beneficiaries rights to the benefit of the property.3 Benefits may favour some beneficiaries over others and may change over time. It is often true that no particular beneficiaries or beneficiary has the full right to enjoy all the benefits of the property, nor are the shares of the respective beneficiaries fixed. This can make determining the attributes of ownership of the underlying wealth exceptionally difficult.4 The proposed law is silent even on this subject. Foreign laws can be relevant to the structure of the ownership interests of residents. For example, a resident of a foreign country can set up a Cayman Islands trust or a Liechtenstein Stiftung.5 In addition to the considerable administrative problems that could arise, the legal question of ownership of the corpus of a trust would still is important to the country of residence.6 Another consideration is that if both physical persons and entities are taxed, double taxation can occur unless ownership interests in taxable legal persons are themselves exempt. (III) EXEMPTIONS The agencies and instrumentalities of government are normally exempt from net wealth taxation; such entities are already publicly held, and levying a tax on such assets would not advance any of the stated goals of wealth taxation.7 An argument can be developed that charitable activities be encouraged, and an exemption from wealth taxation may serve as a reasonable tax

1 These entities can also be used for regular, for-profit business purposes. However, in these cases it is typically not difficult to ascertain who the investors are and to attribute wealth directly to those investors. See Richard K. Gordon & Victoria P. Summers, Trusts and Taxes in Civil Law Emerging Economies: Issues, Problems, and Proposed Solutions, 5 Tax Notes Int'l 137, 142-43 (1992).

2 See generally the historical discussion in George G. Bogert, Law of Trusts and Trustees, Section 3 (2d rev. ed. 1984).

3 See, eg, Restatement (Second) of Trusts § 2 (1959); 1 Austin W. Scott & William F. Fratcher, The Law of Trusts §§ 2.3-2.6, at 40-48 (4th ed. 1987-89).

4 Id. 5 Commercial Code arts 552, 558 (LIE). 6 See generally Convention on the Law Applicable to Trusts and on Their Recognition (1984). 7 See, eg DEU VStG §§ 3(1)(1), 3(1)(1a), 3(1)(2), 3(1)(2a). These do not include legal persons

owned by the state but that do not act in a governmental or sovereign function.



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subsidy. 1 However, exemptions may spread far beyond such limited parameters. (IV) TAX BASE If most jurisdictions tax domestic assets (together with world-wide assets of residents) then taxing assets can also form part of international co-ordination of the net wealth tax and relief will be allowable for foreign wealth tax paid on assets located abroad, as that is necessary to avoid double taxation. We do not find any such elaboration in proposed law. (V) EXEMPTIONS Many assets are often exempted from the tax base for particular taxpayers. Statutes frequently provide a zero-bracket amount to exclude taxpayers who do not have sufficient wealth to warrant taxation.2 Different jurisdictions have enacted various exceptions for different reasons. For example, in France, goods necessary for the practice of a profession are exempt, presumably so as not to burden the means necessary to an individual for the production of her or his livelihood.3 No such consideration has been made in the proposed law. (VI) VALUATION Valuing net wealth often poses serious practical difficulties. Some jurisdictions, such as Germany, have a general valuation law that is used for all taxes.4 Other jurisdictions, such as France, have different rules for income taxes and for wealth taxes.5 The value of immovable property, for example, can be estimated using the same rules as for real property taxes or stamp duties. This can of course lead to large inequities if the value for purposes of the other tax is distorted. Because of the difficulty of performing a valuation, it is often provided that for certain kinds of assets a valuation remains in effect for a specific number of years, or there may be a formulary adjustment of the valuation for a specified period.6 Perhaps the most difficult valuation problems are likely to arise from the varying forms of interests found in companies, partnerships, trusts, and other entities.

1 This argument can be made to advance exemption for all forms of taxation of socially beneficial not-for profit enterprises. See Yishai Beer, Taxation of Non-Profit Organisations: Towards Efficient Tax Rules, 2 British Tax Rev. 156 (1995). Other arguments also exist, including that an exemption from taxation for all not-for-profit enterprises (meaning those that cannot distribute earnings to owners) can help compensate for difficulties not-for-profit entities experience in raising capital. See Henry Hansmann, The Rationale for Exempting Non-profit Organisations from Corporate Income Taxation, 91 Yale L. J. 54 (1981) (although the arguments advanced are addressed to income taxation, they largely also apply to wealth taxation).

2 For example, taxable assets are to exceed the threshold of one million rupees. 3 Id. 4 See DEU VStG § 4. 5 ld. 6 Id.



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(VII) DOUBLE TAXATION Net wealth taxpayers whose world-wide net wealth is subject to tax may be subject to double taxation.1 (VII) LEGAL ISSUES It is not evident, what is the exact nature of the levy, nevertheless it may be stated that in case it is a wealth or wealth transfer tax, federation is no more empowered to legislate on this subject as these areas included in concurrent legislative lists now do fall within the domain of provinces. However, in view of Supreme Court’s distum2 the present levy may fall within the domain of income tax and the issue of double taxation would obviously emerge. To sum up it may be stated that proposed legislation is purposeless and wanting in many areas and requires a serious review.

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1 Double taxation can be eliminated either by unilateral relief or by tax treaties. For example, under treaties, immovable property is normally taxable in the country in which the property is situated. An important difficulty in relying on treaties is that there are relatively few that cover net wealth taxes. But in the proposed law moveable assets are being taxed and the net work of tax treaties will bring a zero sum game as regards foreign entities and entities owned by resident; in foreign countries are concerned.

2 Elahi Cotton Mills v Federation, PLD 1997 S.C. 582.

Tax News Pakistan TN. 1047


FBR again misses revenue collection target Keeping its previous tradition intact, the Federal Board of Revenue (FBR) has once again missed the annual revenue collection target by huge margin of Rs430 billion during the financial year (July 2012 to June 2013) ended on Sunday. “The FBR has provisionally collected taxes worth Rs1940 billion during last financial year 2012-2013, which may go to Rs1950 billion when figures get finalise”, said Ansar Javed, while talking to The Nation. Javed retired as chairman FBR on Sunday. Meanwhile, the government has appointed Tariq Bajwa as new chairman FBR. Earlier, he served as secretary finance in Punjab. The government never collected revenue collection targets in past several years despite imposing new taxes worth billions of rupees on masses. The Federal Board of Revenue has struggled to achieve the revenue collection target during the last financial year 2012-2013 that forced the tax department to revise its target several times in a single year. The budgetary target of Rs2,381 billion was revised downward to Rs2,191 billion for 2012-13. The FBR target has been further slashed to Rs2,050 billion, which was further slashed to Rs2007 billion. The FBR has announced three tax amnesty schemes, one for regularising the non-customs paid vehicles and second for textile sector to clear their past sales tax liabilities to generate additional revenue within ongoing fiscal year to reach the annual tax collection target. The third amnesty scheme was to waive off additional tax penalties and fines of those who will pay their pending taxes fully by June 30, in one fiscal year by FBR. Despite these schemes, FBR failed to achieve the thrice revised target of Rs2007 billion. Due to lower revenue collection and huge power subsidies, the budget deficit could end on 9 percent of the GDP in last financial year 2012-2013. The new government of Pakistan Muslim Nawaz (PML-N) faced a jolt as it set revenue collection target for next financial year 2013-2014 on the basis of Rs2007 billion expected to be achieved before June 30 2013, which could not materialize. The government has fixed Rs2475 billion tax collection target for upcoming financial year 2013-2014 on the basis of Rs2007 billion. The government would either reduce revenue collection target by Rs57 billion or would take additional measures to reach the target of Rs2475 billion next fiscal year 2013-2014.

TN. 1048 Tax News Pakistan


The IMF team already asked the Pakistan to take additional revenue generation measures to reach the target of Rs2475 billion, which was refused by the country’s economic side. The Finance Minister Ishaq Dar has made a commitment on the floor of the National Assembly that government would not impose any additional taxes of Rs275 billion on the demand of anyone. – Courtesy The Nation Staggering failure: FBR misses revenue target by Rs461 billion The Federal Board of Revenue (FBR) has failed miserably to meet the outgoing fiscal year’s tax collection target, weakening Islamabad’s position as it enters a ‘make-or-break’ round of talks with International Monetary Fund (IMF) for a new bailout programme today (Monday). According to provisional results compiled till Sunday, the board could only collect Rs1.92 trillion in taxes, falling short of the original collection target by Rs461 billion and the revised target by Rs87 billion. The previous parliament had originally approved a Rs2.381 trillion annual revenue target for 2012-13 (which ended Sunday as well), but the figure was revised to Rs2.007 trillion by the new government after it foresaw a significant shortfall. The staggering shortfall has pushed Pakistan’s budget deficit to around Rs2.1 trillion – over 9% of gross domestic product – the highest ever in the country’s history. The initial collection results are even lower than the expectations of the visiting IMF team, which placed the figure at around Rs1.97 trillion. According to finance ministry sources, the future of the Pakistan-IMF relationship hinges on today’s (Monday) policy level talks, where both sides will discuss the conditions for the new bailout. They lamented that FBR’s failure has not only robbed Pakistan of some leverage before the lending institution in this regard, but also strengthened its impression that next year’s revenue target of Rs2.475 trillion is ‘unrealistic’. To achieve the target, FBR will need to collect Rs555 billion more than the collection figure for 2012-13 – a feat that requires a growth rate of 29%. Such a rate will not be possible until the government revamps the board, the sources said. The IMF has already demanded Pakistan levy new taxes worth Rs275 billion to achieve the target for 2013-14. However, Finance



Minister Ishaq Dar has ruled out the possibility of levying new taxes, even if the IMF refuses to give the country a loan. According to the sources, the institution has forwarded the first draft of a letter of intent (LoI) – a set of policy actions that Pakistan will have to implement to qualify for the bailout programme – to the government. The first draft will remain open for discussion, they said, adding that once an agreement is reached, the LoI will be signed by the finance minister and the governor of the State Bank, and will be sent to the IMF as a formal request for the loan. While revealing the provisional results to The Express Tribune, outgoing FBR Chairman Ansar Javed claimed that the board will manage to pool between Rs. 20 billion and Rs30 billion more and push the total collection figure for 2012-13 to Rs1.94 trillion after making some ‘book adjustments’. Sources, however, maintained that any collection beyond Rs5 billion on account of the adjustments would be the result of taking more advances from banks. Rampant corruption within FBR, tussles between Customs and Inland Revenue Services Groups, and political appointments at key posts are said to be some of the main reasons behind the massive shortfall. “If the FBR has failed, it is not my responsibility,” asserted Javed. A senior board official, meanwhile, has urged the new government to appoint a commission to ascertain the reasons behind the failure to meet the revenue target. – Courtesy The Express Tribune Price hike: Transporters warn of countrywide strike if FBR sticks to rise in tax All transport associations of cargo trucks, oil tankers and passenger bus services across the country have rejected the nearly 700 per cent increase in income tax on transport by the Federal Board of Revenue (FBR). They have also warned of a countrywide strike if the decision is not withdrawn. The decision came after a meeting of the supreme council of All Pakistan Transporters, the apex body of all transport-related unions and associations, on Thursday at Mauripur Truck Stand. Talking toThe Express Tribune, All Pakistan Transporters’ general secretary Hanif Marwat said that they were paying Rs68,000 per year in income tax for a truck



carrying 60 tons but now the FBR has increased it to Rs428,000 per year for the same truckload. “The new tax will be applicable from July 1 (today) across the country but all the transporters unions reject this nearly 700 per cent increase in tax and demand the FBR take back its decision,” he said. “Otherwise, we will be forced to go on strike by suspending all transport activities in the country.” Marwat added that they are in contact with bus, oil tankers and tractors unions of all the four provinces and within two days they will devise their future plan of action. “We will meet the chief income tax officer and the excise and taxation director general to discuss the issue,” he said, adding that they will also write letters to the president and the prime minister. If all else fails, the associations plan to go to court against the FBR and try to get a stay order against this new tax. “We are the largest tax payers in the country yet we have not been given any facilities,” he said, adding that even when their vehicles are looted and torched in daylight, the owners are never given compensation. Even the operators of air-conditioned buses are upset with the new tax. Haji Abdur Rauf, the general secretary of Sindh Air-conditioned Bus Owners Association, said that they were paying Rs100 per seat annually for a bus but now it has been increased to Rs700 per seat. “All the bus owners associations reject this increase in income tax and demand the government take back its decision,” he said. In denial? Meanwhile, there are some who believe there has been a mistake. The FBR’s new income tax cannot be applied and it is even harder to be believed, said Capt. Asif Mehmood, the chairperson of the supreme council of All Pakistan Transporters. “It seems like someone has provided the wrong information to the FBR on which the taxes have been increased,” he said. “The FBR authorities have not tried to look into the background while taking this decision.” The meeting was also attended by the representatives of All Pakistan Oil Tankers Owners Association, Trucker that Supply Cargo to Nato Forces, Inter-city Bus Owners Unions and goods transporters association. – Courtesy The Express Tribune



Bajwa appointed new FBR chairman The government has appointed Tariq Bajwa, a Grade 21 officer of DMG, as Chairman Federal Board of Revenue (FBR) with immediate effect. His appointment has been made at a time when the FBR has failed to achieve its tax collection target of Rs2,007 billion, which was revised four times in a year. The FBR’s tax collection stood at Rs1,925 billion till Sunday night against the desired target of Rs2007 billion, so in the outgoing financial year, the FBR has been missing out on its revised target with a massive margin of Rs82 billion. It will have a far-reaching impact on fiscal deficit as it will cross nine percent of GDP from the earlier revised target of 8.8 percent of the GDP in 2012-13.Earlier, Bajwa was serving as secretary finance Punjab. Bajwa had also served in the Federal Finance Ministry, Erra and other important departments. Tariq Bajwa is the younger brother of former secretary Asif Bajwa, who is currently serving as DG Pakistan Statistical Bureau (PSB). When contacted, the newly-appointed chairman FBR said it was a challenging job as efforts would have to be made to broaden the narrow tax base and increase the revenue in the years ahead. When asked about achieving the ambitious tax collection target of Rs2,475 billion in the financial year 2013-14, he said that he would first analyse the situation, then a strategy would be finalised to achieve the desired target. “I have performed in the Punjab and with the grace of Almighty Allah, I will deal with the challenging situation,” he said and concluded that first he would get a briefing, then would chalk out a strategy to get the desired results. With the induction of a DMG officer on the important slot of chairman FBR, there are certain senior officers of the Inland Revenue Service (IRS) and Customs Group who have been bypassed such as Riffat Shaheen Qazi, Musarat Jabeen, Aftab Ahmed Baloch, Yasmeen Saud, Amir Muhamnad Marwat, Mustafa Ashraf, Ijaz Hussain Shah, Shahid Hussain Asad and Anwar Goraya. – Courtesy International The News 2012-13 worst financial year for FBR The 2012-13 financial year has proved to be the year of poorest performance in the 65 years history of the Federal Board of Revenue (FBR).



According to the facts and figures received Sunday night, the annual deficit of the FBR has touched the all time record limit of Rs451 billion. The FBR had set a total of Rs2,381 billion target during the current fiscal year which was revised and reduced four times. The FBR failed to achieve the Rs2,007 billion target. The Board collected around Rs1,930 billion taxes till 11:00pm, June 30, 2013. So the new Chairman FBR Tariq Bajwa and his FBR team will have to work hard to collect additional Rs545 billion taxes as compared to total recoveries during the financial year 2012-13 because Rs2,475 billion is the annual revenue target of FBR in the financial year 2013.The new FBR chairman will have to remove the corrupt officials from field formations and the FBR headquarters to achieve this target. – Courtesy International The News July-June (2012-13): FBR suffers Rs 456 billion historical shortfall The Federal Board of Revenue (FBR) has suffered historic shortfall of Rs 456 billion as provisional revenue collection in 2012-13 stood at Rs 1,925 billion against budgetary target of Rs 2,381 billion. Sources told on Sunday that the FBR’s provisional revenue collection stood at Rs 1,925 billion during July-June (2012-13). The FBR’s tax collection now stands at Rs 1,925 billion till Sunday night against the twice revised target of Rs 2,007 billion so the FBR has been missing out its revised target with massive margin of Rs 82 billion in outgoing financial year. It is expected that the provisional revenue collection in 2012-13 would cross Rs 1,929 billion till Monday (July 1). As compared to the budgetary target of Rs 2,381 billion, the tax machinery had estimated to reach the figure of Rs 1,952 billion, reflecting a massive shortfall of Rs 429 billion. However, the actual revenue collection is far less than the expected collection of Rs 1,952 billion, by the end of current fiscal. Sources said that the target of Rs 2,475 billion needs to be reviewed in view of actual revenue collection during 2012-13. The revenue collection target of Rs 2,475 billion is totally unrealistic for 2013-14 in view of provisional revenue collection of Rs 1,925 billion during 2012-13.



If the tax machinery is unable to meet the target of Rs 2,381 billion for 2012-13, the revenue collection target of Rs 2,475 billion for 2013-14 is unrealistic. Keeping in view current pace of revenue collection, the next fiscal year’s target of Rs 2,475 billion seems very ambitious. – Courtesy Business Recorder

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