Tax laws

Tax Laws Ordinance 2021 (Third Amendment): Senate body rejects most provisions

ISLAMABAD: The Standing Senate Committee on Finance rightly rejected most of the provisions of the Tax Laws Ordinance 2021 (Third Amendment), including the mandatory requirement for the corporate sector to switch to digital payment at from December 1, 2021.

When reviewing the Tax Laws (Third Amendment) Order of 2021, here Thursday in the House of Parliament, the finance committee also rejected an enabling provision allowing the online market facilitator to operate as a withholding agent under the Eleventh Schedule of the Sales Tax Act, 1990.

The committee also rejected the powers of the RBF to deactivate cell phones or cell phone SIM cards; interruption of the electrical connection; and the interruption of the gas connection for people who are not on the list of active taxpayers (ATL) but who are required to file a declaration.

Senator Saleem Mandviwalla informed the committee that the whole business in Karachi operates by check. The implementation of the digital payment method would become a major problem for the whole business and commerce.

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The FBR tax authorities should explain how we will conduct our business after the implementation of the digital payment method. If there are checks going around the market, that doesn’t mean there is tax evasion or evasion.

Most markets in Karachi use checks for doing business, not for avoiding taxes. These checks are a form of collateral or promissory notes. “How are we going to do business without checks?” He asked RBF officials.

Mandviwalla added that the check is a document, but it is not necessary for the businessman to make the payment by check, but as a guarantee in the market.

Senator Mohsin Aziz also rejected the switch from RBF to digital payment. There is a payment cycle of three months, six months, etc., for making payments in the marketplace, which is done by check.

Senator Musadik Malik said the RBF assumed that all of Pakistan can transact digitally. The RBF also assumed that everyone in the country has a mobile app to make digital payments. The State Bank of Pakistan (SBP) is expected to explain how many businesses are allowed to make digital payments.

He said the FBR also assumed Pakistan is digitally activated. These are also assumptions and practically the digital payment method cannot be implemented in the country.

The chairman of the committee, Senator Talha Mehmood, unanimously rejected the FBR’s decision to switch the corporate sector to digital payment.

The committee approved the proposal that NADRA will share data with the RBF for the broadening of the tax base, the calculation of indicative revenues and the identification of potential tax evasion.

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The committee also rejected the revised sanctions regime under section 182 (Offenses and Sanctions) of the Income Tax Ordinance, 2001.

To a question, the FBR Inland Revenue (Policy) member said the related NADRA provisions in the Tax Laws (Third Amendment) Order 2021 have nothing to do with the National Accountability Bureau (NAB) . The Tax Laws (Third Amendment) Ordinance 2021 did not give any access to taxpayer data to the NAB.

He added that a memorandum of understanding between RBF and NADRA is underway for data exchange with the aim of broadening the tax base.

In response to a question, the FBR Inland Revenue (Policy) member said the construction industry amnesty program expired on June 30, 2021, but anti-money laundering laws still apply.

The committee also approved the zero-rating of the sales tax on fed milk.

The committee strongly rejected the view of the FBR member Inland Revenue (Policy) that the online marketplace is used for the supply of goods for sales tax purposes. The supply of goods is taxable and the online marketplace is the supply of goods, said an RBF member.

The committee also approved the proposal to give legal cover to foreign remittances through Money Service Bureaus (MCBs), Currency Exchange Companies (EC) and Money Transfer Operators (MTO), which would be considered as foreign currency sent from outside Pakistan through normal banking channels.

The committee rejected the proposal to collect an additional advance tax at the rates specified in section IV of part IV of the first annex from professionals not appearing on ATL and operating from residential premises with domestic electrical connections from companies of electricity distribution.

The professionals included accountants, lawyers, physicians, dentists, healthcare professionals, engineers, architects, IT professionals, tutors, trainers and others engaged in the provision of services. .

Copyright Business Recorder, 2021