Tax laws

Smart Tax Law Drafting – Journal

The government promulgated the Presidential Ordinance – the Tax Laws (Third Amendment) Ordinance 2021 – on September 15, providing for certain enforcement measures aimed at improving documentation of the national economy, improving tax compliance and broaden the tax base.

Although it became law and has been in force since then, it has a limited lifespan of 120 days unless it is passed as a permanent law by parliament. The bill to make the ordinance into an act of Parliament was already rejected by the Standing Senate Committee on Finance and Revenue last week.

The main reasons for the rejection, mainly related to the income tax and sales tax provisions, including mandatory conditions for the corporate sector to fully switch to digital payments (instead of manual checks etc. ) as of December 1, 2021, and the disconnection of connections to public services, including mobile phones, to those not on the list of active taxpayers.

The committee also requested a written explanation from the chairman of the Federal Tax Council (FBR) as to the origin of the proposals and rejected the prosecution’s directive for unauthorized disclosure of information by an official.

However, so far, the focus has not been on changes to customs legislation through the same – Tax Laws (Third Amendment) – Ordinance making three changes to customs legislation that broadened the discretionary power of customs officials and the risk of massive revenue losses at the import stage.

Customs-related changes should be considered if the authors are beneficiaries of changes in customs law.

One of these amendments transferred from the Customs Appeals Tribunal to the Membership Customs Policy (FBR) the power to hear appeals against the rulings and judgments of the Director General of Customs Valuation, allowing a customs officer to make, in his capacity as collector, under-evaluations of duties and taxes on arbitrarily low values, then to empower the same agent to finally maintain these low and arbitrary values ​​in his capacity as appellate authority as a member of customs policy.

One of these situations involving large amounts is already under investigation by the RBF. The Customs Intelligence Department of the FBR reported loss of revenue worth billions of rupees, alleging that customs collectors in Quetta assessed duties and taxes on imported goods at very low and arbitrary values ​​in violation of values ​​of Much higher valuation legally determined by the valuation director. .

Among those blamed for these lost earnings is now the FBR headquarters and it appears that the changes to the customs law are designed to make such investigations fruitless. Membership policy FBR Customs may have to explain the shrewd move behind the amendment. This is important because if the Director General of Valuation, in exercising his powers under customs law, rejects the assessed values ​​used by collectors in Quetta, one of those accused collectors will now be able to overturn the decision. of the General Manager and maintain the allegedly illegal securities used by him and others during their tenure as collectors.

Another amendment adds the word “corporate guarantee” after the word “bank guarantee” in the provision of customs law dealing with provisional assessments of duties and taxes on goods imported against a guarantee. Obviously, the bank guarantee is a cashable instrument unlike a company guarantee which is most often an invaluable paper.

The amendment expanded the discretionary power of customs officials to demand a bank guarantee from importers in case of provisional valuations and ultimately to settle for easier and much softer security of the company guarantee in exchange for ‘personal monetary gain. This opens the door to negotiations between the importer and customs officials at the cost of lost income.

A third amendment to the customs legislation strengthened the incentive for customs officials responsible for valuation to agree with importers and clearing agents to strike money, resulting in lost revenue in the process.

Customary law, prior to this amendment, provided that; ‘If, during the verification of a goods declaration, it is found that a declaration in that declaration or document or any information so provided is not correct with regard to any question relating to the assessment, the goods shall, without prejudice to any other action, which may be taken under the Customs Act, be reassessed for the duties, taxes and other charges levied thereon ”. This provision imposed a requirement on customs officials responsible for valuation to scrutinize goods declarations at the time of customs clearance of imported goods.

The amendment added the sentence: “or, notwithstanding the provisions of customs law, within three years of its clearance”, thus relaxing the requirement for a rigorous examination of goods declarations at the customs clearance stage and providing officers customs assessors an additional incentive to come to an agreement with clearing agents to earn money at the cost of lost income.

This amendment also diluted the power of customs intelligence which, prior to the amendment, was used to incriminate customs assessors in the prosecution of them against offenses committed and income lost at the customs clearance stage.

The amendment has, in effect, freed the customs officers responsible for the valuation and clearance of imported goods. Now, if Customs Intelligence discovers such instances of erroneous valuations after a year or two and initiates a process to hold officials accountable for the undervaluation, the valuation officials could go unchallenged on the grounds that they had. still time to correct the assessment, but practically these materials are usually consumed. . It should be considered whether the authors are beneficiaries of changes in customary law.

Posted in Dawn, The Business and Finance Weekly, November 22, 2021