ISLAMABAD: The government has introduced a range of amendments to the tax laws through the Finance Bill 2020 to improve compliance through penalties for non-tax paying individuals and relaxation in some procedures to facilitate taxpayers.

The amendments have been introduced to the Income Tax Ordinance, 2001, Sales Tax Act 1990 and Federal Excise Act. They aim at collecting data on individuals absent from tax rolls, retailers who have not integrated with the Federal Board of Revenue (FBR) online system and electronic surveillance of businesses.

These amendments will come into effect from July 1.

One of the major amendments in income tax laws is related to filing of taxpayers’ profile electronically. The profile filing is mandatory for taxpayers including non-profit organisations. The changes will mandate taxpayers to provide details of bank accounts, utility connections, business premises, and type of business. Individuals, who fail to submit a profile or update it, will have to pay a penalty of Rs2,500 each day.

The name of a non-compliant individual will also be removed from the active taxpayers list. The name would only be included on the list again once the individual files the profile along with payment of surcharge of Rs20,000, Rs10,000 and Rs1,000 for company, association of persons and individual, respectively.

The income tax commissioner has also been empowered to revise the taxpayer’s wealth statement . However, no revision will be allowed after expiry of five years from the due date of filing of return of that year. The appeal fee has also been revised upward.

The amendments also provide incentives for taxpayers under alternate dispute resolution. One of the major facilities introduced through the amendments is that if the aggrieved taxpayer has not communicated the order of withdrawal to the commissioner within 60 days of the service of the decision of the committee, the decision will not be binding on the commissioner.

To facilitate listed companies, the commissioner is bound to issue exemption certificates, on the basis of advance tax payment for the years, within 15 days of the filing of an application, failing which a certificate will be automatically issued through the system. The withholding agents will now file withholding statements on a quarterly basis instead of on biannual basis.

The commissioner is also empowered to determine taxable income on the basis of sectoral benchmark ratios. However, this power is granted for use in some specific conditions. The person who fails to file three consecutive monthly or an annual withholding tax statement under Section 165 of the Income Tax Ordinance will also not fall in the definition of an active taxpayer.

Moreover, any person, who is required to share information under section 56AB, fails to do so in the manner required under the law will pay a penalty of Rs25,000 for first default and Rs50,000 for each subsequent default.

The bill also proposes to empower the FBR to make rules relating to electronic real-time access for audit or survey of persons liable to tax.

In order to increase the tax base and to crack on potential tax evasions, the bill empowers the FBR to make arrangements to have real-time access to information and database of the National Database and Registration Authority, Federal Investigation Agency and Bureau of Emigration and Overseas Employment, Islamabad Capital Territory and Provincial and Local land record and development authorities, Islamabad Capital Territory and Provincial Excise and taxation Departments, all electricity suppliers and gas transmission and distribution companies, any other agency, authority, institution or organisation, notified by the FBR.

Published in Dawn, June 14th, 2020