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FBR seeks to recover lifetime tax from small cars owners

Updated August 08, 2019

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An owner of up to 1000cc car, who is paying Rs1,800 per year, including Rs800 as income tax, will now be required to pay Rs20,000, including Rs10,000 as income tax in case of filer. — AFP/File
An owner of up to 1000cc car, who is paying Rs1,800 per year, including Rs800 as income tax, will now be required to pay Rs20,000, including Rs10,000 as income tax in case of filer. — AFP/File

ISLAMABAD: In a rather tricky move, the Federal Board of Revenue (FBR) appears to be taking advantage of lifetime token tax collection by the provinces on small cars by seeking to recover lifetime income tax from these lower middle class citizens — a sort of double jeopardy.

This will mean that an owner of up to 1000cc car, who is paying Rs1,800 per year, including Rs800 as income tax, will now be required to pay Rs20,000, including Rs10,000 as income tax in case of filer. The motorists will bear additional ‘financial burden’ under the heads of professional tax, which is Rs1,000 on lifetime token.

Those who do not exist on the active taxpayers list will have to make an additional payment of Rs10,000 effective from July 1, 2019.

However, for people, including pensioners, who are not required to file returns or statements, an application will be submitted to the income tax commissioner to explain the reasons that the person is not required to file returns for having no additional income.

Those not on active taxpayers list will have to make an additional payment of Rs10,000

The commissioner is bound to reply within a month. In case of failure, the applicant will qualify for automatic exemption from the penalty of non-filer or not existing on active taxpayers list.

As the scheme largely targets car owners from the middle class, most of the people will take it as burden to pay in lump sum. In the Finance Act 2019, the interior ministry has introduced lifetime token tax on cars/jeeps having the engine capacity up to 1000 cc from July, which is mandatory in Islamabad. Earlier, the per annum facility was available to owners of cars falling in this category in the federal capital.

Following the pattern of Islamabad, the Sindh government has also introduced lifetime token tax on cars/jeeps having the engine capacity up to 1000cc effective from July 1.

For the first time, the excise department of Punjab has introduced the lifetime token tax collection in 2012 on cars/jeeps having the engine capacity up to 1000 cc.

FBR spokesperson Dr Hamid Ateeq told Dawn that the decision of lifetime token tax was taken by the provincial excise department. “We have no other option, but to collect in advance income tax along with life token tax,” he said.

Asked why the FBR had decided to collect advance income tax along with lifetime token tax, Mr Ateeq said that a car owner would not deposit income tax on yearly basis in case of payment of life token tax.

Under the income tax ordinance, the lifetime advance income tax rates are also notified for vehicles of all engine capacity. “We have introduced the table of lifetime income tax for cars/jeeps of engine capacity over 1000 cc to facilitate the provincial excise departments in case they want to extend collection of lifetime token tax to other cars of higher engine capacity”, he said.

The rates of income tax collection in the income tax ordinance are slightly lower for renewal of registration as compared to fresh registration of cars. Similarly, the excise department has introduced lifetime token tax for motorcycles and scooters in Islamabad and Sindh, respectively.

The excise department of Khyber Pakhtunkhwa has so far continued with the old system of annual collection of token tax from cars of engine capacity up to 1000 cc. “We have not notified so far the lifetime token tax,” an official of the KP excise department said.

The excise department of Balochistan has also continued with the per annum facility of token tax collection along with the income tax.

Over and above, the excise department has also enhanced the rates of penalty for those who do not deposit the token tax within due date.

But an official of the excise department believes the move will help vehicle owners who will get rid of the hassle of making queues at tax counters for payment of tax every year.

However, the move to charge vehicle tax for life will bolster the government revenue.

Published in Dawn, August 8th, 2019