The Pakistan Tax Bar Association (PTBA) has asked the government to remove what it calls discrimination and ambiguities in the implementation of the Voluntary Tax Compliance Scheme (VTCS) and to offer it to all sectors of the economy.
In a petition to the government, PTBA has highlighted the necessary amendments required in the VTCS to make it more effective. The association calls for removal of ambiguities in Income Tax (Amendment) Act, 2016 and calls for including professionals, manufacturers and service providers within the ambit of VTCS.
It says that the VTCS is silent about Sales Tax, adding that the fear is that that FBR is spreading a net to bring the traders in the ambit of sales tax through VTCS and afterwards they might face sales tax audits and investigations. Therefore, it would be appropriate to introduce a compliance scheme both for income tax and sales tax.
Terming the scheme discriminatory, as it was launched only for traders, the association called for including other segments of the business community to avoid unnecessary litigation, and discrimination within the business community as it is against the constitution.
About the banking transactions in undeclared bank accounts, PTBA said that the federal government had itself introduced the concept of filers and non-filers in income tax laws and penalised non-filers by imposing 0.6 per cent advance tax on the banking transactions of non-filers with effect from July 2015. Apparently, a non-filer, who does not file his return and forgoes his 0.6% advance tax, is discharged from payment of any further tax and is not caught by the tax authorities. This scheme is also discriminatory as it affects only those non-filers whose transactions are traceable, PTBA said.
The government is going to introduce VTCS for traders which mean that the traders will enjoy immunity from any probe of their banking transactions within the last 10 years which is also discriminatory and will attract litigation by other segments of business community.
PTBA said that it was more practical that the FBR indiscriminately allowed all account holders to declare their undeclared accounts against payment of 0.1 per cent to 0.6 per cent tax on the banking transactions of the last five years from July 2009 to June 2014.
If any person does not declare his transactions voluntarily, then the FBR should take information from the banks and collect such tax forcefully. PTBA also proposed that protection should be granted that Section 122(5) and 122(5A) of the Income Tax Ordinance, 2001 will not be invoked against declarations under this scheme.
PTBA further demanded that after the expiry of the stipulated period, strict punitive measures should be taken against non-filers as the law cannot be properly implemented if people do not take it seriously.
The PTBA also criticised the fact that under VTCS a person declaring income up to Rs 1 million is not required to file a wealth statement. The Association suggested that wealth statement should be required from every person who avails VTCS irrespective of the amount of wealth.
